Risk analysis of China Stock Market based on EGARCH-M models and Shanghai-Shenzhen 300 index

Abstract

This paper highlights that EGARCH(1,1)-M models based on Generalized Error Distribution (GED) , student-t distribution and normal distribution are applied to calculate VaR of day logarithm return series of Shanghai-Shenzhen 300 index, and are compared with GARCH(1,1) model based on normal distribution. The empirical research through statistical analysis and back-testing has shown that EGARCH(1,1)-M model based on GED distribution was superior to the other three on describing in the market risk of China Stock Market. Based on the analysis results this study comes to the conclusions and some suggestions for the further research.