Copyright © 2009 Hao Liu et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
The proposed ARCH and its extension model have brought a powerful tool
for the study of stock market volatility as well as verify that a “high risk brings
high-yield” and the “leverage effect” of stock market. This paper gives modeling
analysis by using the ARCH group models; in the last ten years Shanghai's index
returns, concluded that there are significant “high-yield associated with high-risk”
phenomenon and the “leverage effect” in the domestic securities market.
The previous studies in fitting return series of ARMA models, mostly with low
accuracy have a very subjective “observation autocorrelation and partial autocorrelation
function method,” and even directly use “random walk” model. That
will inevitably have some impact on the accuracy of the model. While this paper
adopts the Pandit-Wu formulaic modeling method, the ARMA model is built
on a strong theoretical foundation.