Impact on the Results of ARCH Models with Different Distribution of the Residuals - Based on Comparative Analysis of Shanghai Stock Market Index Returns

Author

Fang-yuan, Lu ; Cheng-yu, LI

Author_Institution

Zhengzhou Univ., Zhengzhou

fYear

2007

fDate

20-22 Aug. 2007

Firstpage

1882

Lastpage

1887

Abstract

This paper uses ARCH models to analyze Shanghai stock market index returns from 19 December 1990 to 30 November 2006, and compares the results of ARCH models with normal distribution and t distribution, finding that the results are very different. The conclusion is that the reasonable results of ARCH models are determined by selecting appropriate distribution of the residuals. T distribution is better suited to fitting the distribution of the residuals than normal distribution. The ARCH effect exists in Shanghai stock market. The leverage effect is significant, and the impact of negative news in the stock market is larger than positive news. Fluctuations caused by impact will be permanent, and can not be eliminated in a short time. The phenomenon of high returns with high risks does not exist in the market.

Keywords

autoregressive processes; normal distribution; stock markets; ARCH models; Shanghai stock market index returns; normal distribution; t distribution; Cause effect analysis; Conference management; Data analysis; Engineering management; Finance; Fluctuations; Gaussian distribution; Radio access networks; Stock markets; ARCH effect; ARCH type models; Shanghai stock market index returns; normal distribution; t distribution;

fLanguage

English

Publisher

ieee

Conference_Titel

Management Science and Engineering, 2007. ICMSE 2007. International Conference on

Conference_Location

Harbin

Print_ISBN

978-7-88358-080-5

Electronic_ISBN

978-7-88358-080-5

Type

conf

DOI

10.1109/ICMSE.2007.4422114

Filename

4422114