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A semi-APARCH approach for comparing long-term and short-term risk in Chinese financial market and in mature financial markets

Yuanhua Feng () and Lixin Sun ()

No 69, Working Papers CIE from Paderborn University, CIE Center for International Economics

Abstract: The aim of this paper is to analyze the long-term and short-term risk components in Chinese financial market and to compare them with those in mature financial markets. For this purpose a most recently proposed Semi-APARCH is applied to the Shanghai Index and the Shenzhen Index, and four financial indexes in mature markets. A few important empirical findings are achieved. Firstly, the current long-term risk in Chinese financial market is stable and at a low level. Secondly, the dependence level between long-term risk in Chinese financial market and that in mature financial market is not high. Thirdly, the short-term risk in Chinese financial market differs to that in a mature financial market at least in two ways: 1) The leverage effect in Chinese financial market is much lower than that in a mature financial market. 2) The innovations in Chinese financial returns is nearly heavy-tailed distributed. This is however not the case in a mature market.

Keywords: Chinese financial market; mature financial markets; long-term risk; short-term risk; semiparametric APARCH (search for similar items in EconPapers)
JEL-codes: C14 G10 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2013-12
New Economics Papers: this item is included in nep-rmg and nep-tra
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