Research on Risk Measurement in Chinese Stock Market - Based on GARCH-VaR Modeling

Abstract

Chinese stock investors, whether he is an individual investor or working for a investment company, are always worried about the risk of their asset, it is difficult to measure the risk without a functional model, thus, using a model to solve it is of the pivot. The initial aim of this paper is to measure and predict the risk of Chinese stock market using GARCH-VAR model. By analyzing historical stock index return data, this paper develops a dynamic model to capture the volatility and risk correlation of the stock market. The comprehensiveness and accuracy of the results are ensured by using recent data, including stock indices that broadly cover different industries and market capitalization. The findings suggest that significant volatility and risk correlations exist in the Chinese stock market. This paper provides an effective methodology to measure and predict the level of risk in the stock market, which provides investors and risk management organizations with valuable references and decision-making bases and is important for understanding and managing the risk in the Chinese stock market, which helps stock investors to make informed optimal decisions on risk management and asset allocation.