Stock Returns and Volatility on China's Stock Markets

Posted: 8 Nov 2000

See all articles by Cheng-Few Lee

Cheng-Few Lee

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics

Gong-meng Chen

Hong Kong Polytechnic University - School of Accounting and Finance

Oliver M. Rui

China Europe International Business School (CEIBS)

Abstract

We examine time-series features of stock returns and volatility, as well as the relation between return and volatility in four of China's stock exchanges. Variance-ratio tests reject the hypothesis that stock return follows a random walk. We find evidence of long memory of returns. Application of GARCH and EGARCH models provides strong evidence of time-varying volatility and shows volatility is highly persistent and predictable. The results of GARCH-M do not show any relation between expected returns and expected risk. Daily trading volume used as a proxy for information arrival time has no significant explanatory power for the conditional volatility of daily returns.

JEL Classification: G15

Suggested Citation

Lee, Cheng-Few and Lee, Bong-Soo and Rui, Oliver M., Stock Returns and Volatility on China's Stock Markets. Available at SSRN: https://ssrn.com/abstract=240368

Cheng-Few Lee (Contact Author)

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

111 Washington Avenue
Newark, NJ 07102
United States
732-445-3907 (Phone)
732-445-5927 (Fax)

Bong-Soo Lee

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Oliver M. Rui

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

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