Analysis on Asymmetrical Fluctuation of Stock Returns on Historical Information in China

Abstract

This paper tests the existence of asymmetrical volatility clustering in Chinese emerging stock market and it is found that when innovation is negative, the fluctuation equation is significantly different from the model when innovation is positive. This paper discusses the volatility's asymmetrical reaction to autocorrelation of stock return and estimates the threshold value of ACF (autocorrelation function). Finally, it is proved by the empirical results that the difference of effect of innovation to fluctuation is significant between positive ACF that is more than some threshold value and negative ACF that is less than other threshold value.