Research on Implicit Cycle of Volatility in Chinese Stock Market

In this article, we analyze the characteristics of the implicit cycle of volatility in Chinese stock market by the theory of frequency spectrum. Through searching literature, we know the fact that the study of volatility in Chinese stock market always concentrate their attention on existence of volatility and there is lack of research on the implicit cycle characteristic in the market volatility. In recent years, some scholars also study the volatility in Chinese stock market and hold that there is implicit cycle of volatility in Chinese stock market, but don´t provide the statistical test about peak value. The essence of implicit cycle in volatility is the performance of the low efficient market. Therefore, in this article, we establish the periodgram analysis model, and apply the window spectrum estimate of the power spectrum to analyze the volatility of Shanghai´s stock price index and Shenzhen´s. We also study the existence on implicit cycle of volatility in Chinese stock market in order to determine the improvement degree about Chinese stock market´s efficiency. In this article, we study the implicit cycle of volatility in Chinese stock market by the stock index. The volatility of stock market is referring to the volatility that corresponded to the stock index. The author selects the day closing quotation index of Shanghai stock exchange composite index and of Shenzhen stock exchange component index as data sample and the data sector is from January 4, 1999 to December 13, 2005, amount to 1668 trading day. We each establish the two index´s day return rate´s percentage sequence. The data sequence doesn´t have the tendency and seasonal characteristic. We apply the SPECTRA process of the SAS software (spectral analysis process) to determine the sequence´s implicit cycle and provide the statistical test about peak value. So we obtain some researches output. We hold that there does not exist the implicit cycle of volatility in Chinese stock market. From this- research we know that the Chinese stock market efficiency obtains the enhancement and the volatility structure have a greater change than several year ago. We also believe that the higher volatility in Chinese stock market is may caused by the centralized and fierce new message and by the worse market absorbency in the shock of message. Both lead to the stock price´s volatility