TITLE:
The Asymmetry of Shanghai Composite Index Volatility—Stochastic Volatility Models Based on GHST Distribution
AUTHORS:
Xu Han, Jihong Kong
KEYWORDS:
Asymmetric Stochastic Volatility Model, Asymmetry, Gibbs Sampling, Shanghai Composite Index, VaR Risk Measurement
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.8 No.12,
December
28,
2020
ABSTRACT: In this paper, we analyzed how the asymmetric stochastic volatility
models with GHST distribution capture the asymmetry of stock index volatility
in China. Under the setting of fat-tail distribution, we introduced the
correlation parameter ρ of two error terms to refine the classification of ASV
model from two aspects of Contemporaneous correlation and Subsequent
correlation. So we could compare the effect of ASV model in demonstrating the
asymmetry of stock index volatility under the above different settings. Using
the daily returns of Shanghai stock composite index, we concluded that the ASV
model with GHST distribution and Subsequent correlation between error terms can
better describe the asymmetry of the stock index in China. The DIC value and
Kupiec test verified the adequacy and the effectiveness of risk measurement of
the above model respectively.