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Stock Returns and Volatility on China's Stock Markets

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  • Lee, Cheng F
  • Chen, Gong-meng
  • Rui, Oliver M

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.

Suggested Citation

  • Lee, Cheng F & Chen, Gong-meng & Rui, Oliver M, 2001. "Stock Returns and Volatility on China's Stock Markets," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 24(4), pages 523-543, Winter.
  • Handle: RePEc:bla:jfnres:v:24:y:2001:i:4:p:523-43
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