GARCH model and fat tails of the Chinese stock market returns - New evidences

Michael Day, Mark Diamond, Jeff Card, Jake Hurd and Jianping Xu

Journal of Risk & Control, 2017, vol. 4, issue 1, 43-49

Abstract: The Chinese stock market is unique in which it is moved more by individual retail investors than institutional investors. Therefore, for economic and political stability it is more important to efficiently manage the risk of the Chinese stock market. We investigate its volatility dynamics through the GARCH model with three types of heavy-tailed distributions, the Student’s t, the NIG and the NRIG distributions. Our results show that estimated parameters for all the three types of distributions are statistical significant and the NIG distribution has the best empirical performance in fitting the Chinese stock market index returns.

Keywords: generalized hyperbolic distribution; GARCH model; SHA (search for similar items in EconPapers)
JEL-codes: C22 C52 G17 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:rmk:rmkjrc:v:4:y:2017:i:1:p:43-49

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