Modeling Volatility for the Chinese Equity Markets

Frank J. Fabozzi

Radu Tunaru

and

Tony Wu

A series of GARCH models are investigated for the volatility of the Chinese equity data from the Shenzhen and Shanghai markets. There has been empirical evidence of volatility clustering, contrary to findings in previous studies. Each market contains different GARCH models which fit well. The models are used to test for a spill-over effect between the two Chinese markets, an example of volatility transmission within one country and between two equity exchanges. Our testing suggests that there is no volatility transmission between the two markets.