Stock Case
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This paper introduces how to use the long memory theory on Chinas stock market return volatility analysis. The stock market is full of uncertainty. The stock market volatility is normal, moderate price wave motion is beneficial to improve market liquidity and activity, but the acuteness wave motion will destroy the market stability and investor confidence. Chinas stock market is an emerging market, the market fluctuation characteristic of high risk is particularly prominent. Therefore, to our country stock market fluctuation characteristic analysis contributes to the stability of our financial market, to promote economic development.
This article from the research background and significance, reviews the long memory theory development as well as the predecessors research results. In the second chapter explains the theoretical base, such as: the volatility of stock market theory, long memory in terms of research includes its development process, including the long-term memory of the definition, characteristics, test method, long memory analysis of the causes and long memory theory basis, including the introduction of the fractal market theory and the efficient market theory. It emphatically introduced in this paper the analysis methods: R/S analysis. At the end of the thesis selects 04years to 12 years the Shanghai Composite Index Return and Shenzhengchengzhi yields analysis. The empirical results show that: the Hurst index of more than0.5 when the random walk, respectively 0.66 and0.65. This show that the selected sequences in the presence of long-term memory, based on the empirical conclusion that our stock market is not effective. The government should reduce the volatility of financial markets, promote market efficiency and stable and strengthen and standardize information disclosure of market participants, education, government supervision.