An anatomy of Chinese stock and futures markets' dynamic features

Chaoyou Wang, Yuanyuan Guo and Qiang Ye

Applied Economics Letters, 2015, vol. 22, issue 16, 1329-1334

Abstract: This letter uses a fusion model to investigate the coexistence of three distinctive dynamic features of Chinese stock and stock index futures markets: permanent volatility, transitory volatility and jumps. These three features are included in the component-GARCH-jump model proposed in the research. The empirical results show that permanent volatility has smooth movement and that the transitory volatilities strongly resemble each other. Jumps and volatility do not coincide significantly, indicating that the model divides them efficiently. In addition, the stock market is often restrained by daily price limits and processes abrupt information more slowly. Therefore, the stock market has more transitory part and the futures market has more jumps.

Date: 2015
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DOI: 10.1080/13504851.2015.1029111

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