Author(s)

Hongmei Shen and Yongchao Tao

Corresponding Author

Hongmei Shen

Abstract

This paper measures the data from January 4, 2006 to June 30, 2016, and finds that there are ARCH effects in A-share, Bshare, indices of Shanghai Stock Exchange and Hang Seng Index. Therefore, the GARCH family models are established under the assumptions of normal distribution and t- distribution respectively, and the VaR values are calculated. By Back-test test, the validity of VaR is compared, and it is found that both Shanghai stock market and Hang Seng index are suitable for GARCH family model with t-distribution, and there are risk aggregation and information asymmetry in stock market. And this study has a certain reference significance for the investors in the current Stock Connect between Shanghai and Hong Kong. Investors

Keywords

Financial market risk, VAR, Back-test Test GARCH Family