Analysis of Chinese Stock Market based on Stochastic Models

Cheng WANG, Xueyi LIU, Hailei ZOU, Juncheng YIN

Department of Mathematics, China Jiliang University, Hangzhou, 310018, CHINA

Abstract: We divide the Chinese stock market into two periods, Jan 2001-Dec 2005 and Jan 2006-Aug 2013 according to the real market features. Two most important Stock Indexes of China (Shanghai Composite Index

and Shenzhen Composite Index) are selected to reflect the stock market. Generalized tempered stable (GTS)Levy processes are applied on the indexes during each period separately. C-GMM is used to estimate

the parameters in GTS model. From the parameters in two periods, we can analyze the feature and difference of the two different market periods. We find that the stock market during Jan 2001-Dec 2005 has less jumps than that during Jan 2006-Aug 2013. During Jan 2001-Dec 2005, upward jumps are more than downward jumps, while the case is opposite during Jan 2006-Aug 2013. The big jumps in 2001-2005 are less often than those in 2006-2013.

Keywords: Chinese Stock Market; GTS Lèvy Model; C-GMM Estimation; Characteristic Function