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| Long Memory of Extreme Returns in Chinese Stock Market |
| YUAN Ying, ZHANG Tonghui, ZHUANG Xintian
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| School of Business Administration, Northeastern University, Shenyang 110167, China |
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Abstract Different from the previous studies on the long memory and effectiveness of stock market returns and volatility, this paper focuses on the extreme fluctuation behavior of financial markets. Taking the most representative index of Chinese stock market, Shanghai stock index, as the sample, the financial market is divided into different time windows according to a certain period, and the extreme returns in each time window are formed into a time series. Taking extreme return series as the empirical research object, this paper studies the long memory of extreme return in Shanghai stock market by using multiple statistical methods such as rescaling range analysis and Detrended fluctuation analysis. The results show that both extreme return series and extreme volatility series have obvious long memory characteristics. The long memory characteristics of the extreme series is obviously stronger than that of the original full sample return series itself, which shows that there is a certain dependence between the extreme fluctuation behavior of the market, and the extreme fluctuation behavior of the market is measurable to a certain extent. In addition, the correlation between the maximum series and its corresponding volatility series, between the minimum series and its corresponding volatility series, and between the maximum series and the minimum series are further analyzed. The results show that the different extreme series show their own unique and different intensity interdependence.
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Received: 10 May 2019
Published: 29 April 2020
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