Stock Returns and Volatility on China’s Stock Markets

Cheng Few Lee and Oliver M. Rui

Chapter 49 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 1601-1627 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We examine time-series features of stock returns and volatility, as well as the relation between return and volatility in four of China’s stock exchanges. Variance-ratio tests reject the hypothesis that stock return follows a random walk. We find evidence of long memory of returns. Application of GARCH and EGARCH models provides strong evidence of time-varying volatility and shows volatility is highly persistent and predictable. The results of GARCH-M do not show any relation between expected returns and expected risk. Daily trading volume used as a proxy for information arrival time has no significant explanatory power for the conditional volatility of daily returns.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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