Auto-Regressive Conditional Heteroscedasticity Analysis of Portfolio Volatilities

Abstract

By means of the ARCH (Auto-regressive Conditional Heteroscedasticity) and its modified models, this paper presents an empirical analysis of the volatility heteroscedasticity and the resilience to external shocks for China emerging stock market in the past three years based on the stock index of SSE180, SZSE40, Coal/Petroleum and Finance sectors. The results show that the fluctuation of SSE180 index and SZSE40 index decays slowly, indicating both SSE180 and SZSE40 have a long-term volatility self-similarity and assimilation to external shocks. The results for the index of Coal/Petroleum and Finance vary with the capacity of the assimilation to external shocks.