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Long memory in the volatility of China stock returns

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  • Shiyou Zhu
  • Min-Hwan Lee
  • Kyu Sun Hwang

Abstract

In this paper, we empirically examine the volatility process of China's stock market returns using daily and weekly Shanghai and Shenzhen stock indices during January 1990 to August 2008. To investigate the property of the process, we used the FIGARCH (fractionally integrated GARCH) model including GARCH and IGARCH processes as special cases. Since the FIGARCH model allows fractional integration order, it can detect hyperbolically decaying volatility processes which cannot be explained by previous models with integer integration order. Our results show that the Shanghai and Shenzhen stock indices exhibit long-term dependencies. The long memory properties of the Shanghai and Shenzhen stock markets do not seem to be spuriously induced without exception.

Suggested Citation

  • Shiyou Zhu & Min-Hwan Lee & Kyu Sun Hwang, 2009. "Long memory in the volatility of China stock returns," China Economic Journal, Taylor & Francis Journals, vol. 2(3), pages 313-323.
    • Handle: RePEc:taf:rcejxx:v:2:y:2009:i:3:p:313-323
    DOI: 10.1080/17538960903529543
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