Comparative Research on Stock Volatility between Shanghai Composite Index and Dow Jones

Abstract:Accommodating exchange rate factors as exogenous disturbance, this paper proposes a mixed GARCH-Jump model to compares in general the volatility properties of returns series of the Shanghai composite index with those of the Dow Jones index. It also incorporates the asymmetry, clustering and leptokurtosis and fat-tail properties of returns volatility into an integrated analytic frame of so-called diffusion-jump. The fitness test on the model indicates that mixed GARCH-Jump model predicts the abnormality in the financial returns series of the emerging markets more powerfully than the single models.