VOLATILITY ANALYSIS OF CHINESE STOCKS BASED ON GARCH FAMILY MODELS

ABSTRACT

This article analyzes the retrospective data of the sums of the index level of the futures of the chinese stock exchange funds. These indicators were used to form additive automatic regression models for the purpose of point prediction of the sums of future indicators of index points.

Keywords: auto regression analysis and building additive predictive index models for future periods of 2021. China stock exchanges, financial market dynamics, mathematical analysis for financial markets.

This article analyzes the historical values of China's stock market indices and formulate additive models for predicting values for three months in advance for them. To combine the methods of technical and fundamental analysis, a forecast calculation will be performed.

As part of the implementation of an analytical model for building an investment portfolio, it is necessary to consider such directions of movement of quotations as stock indices in China [2]

These stock indices include various securities that are listed on the exchanges of Hong Kong, Shanghai, Shenzhen. Industrial, innovative, biotechnological, space companies, which are included in various numbers in these indices, are the drivers of a complex change in the level of the index in units. Index futures are traded separately. Consider in Figure 1 China's first index of industrial companies.

Figure 1. Dynamics and forecast of the movement of the CITIC 300 index (units) [5]

The dynamics of this index has a positive trend. Since the beginning of the first wave of the pandemic until the current period, this level of the index has grown by about 1,000 points. The forecast area from May 25 to September 25 indicates a gradual rise in the index, with peaks in August and early September 2021. This may be due to the successful reporting of Chinese industrial companies that are included in the index. China's industry has been slightly affected by the pandemic, so the cumulative growth of the index will continue until the end of the reporting period for the second quarter. By September, this index will have a downward trend due to profit-taking based on the results of the formed financial results of the Chinese industry. This index includes well-known companies such as JAC, ShangAn, Geely, Gree Electric, Haier, Midea and many other industrial industries.

Next, we will consider the levels of change in the dynamics of the index for trade enterprises in China.

Figure 2. Dynamics and forecast of the movement of the CSI1000 index (units) [4]

This index shows a downward trend in the aggregate parameters of the index. This could be further related to the drop in positions of Alibaba, Baidu, Tencent and other e-commerce companies that were tied to the value of this index. The reduction parameters may be partially limited by the reporting period in August 2021. If these reports are positive, then simultaneously with the lifting of restrictions in the country, there may be a surge in capital growth of companies (growth in the value of shares), therefore, against this background, many enterprises, including retail and e-commerce, will be able to rise above current values.

Next, we should consider such a well-known index of the Chinese technology sector as Shanghai Composite.

Figure 3. Dynamics and forecast of the movement of the SSEC index (units) [5]

The valuation of technology companies that are included in this index has declined recently. Massive problems of working with Alibaba, Baidu, Tensent, QQ and other high-tech services damaged the reputation of the companies. Alibaba's legal problems, the collapse of a Korean investment fund, and US sanctions for claims against Alibaba's reporting have caused a partial sell-off of major tech companies.

In this regard, the level of the value of this index is in a volatile position according to the values ​​of the current indicators. It is predicted that despite the fall, the level of the index will be restored by mid-summer due to the lifting of restrictions on the pandemic. In the future, the level will return to its average values ​​for the period under review.

Further, it is proposed to consider the industrial information technology index SSE100. This index includes all stocks that are traded on the China Shanghai Stock Exchange as type A and type B.

Figure 4. Dynamics and forecast of the movement of the SSE100I index (units) [5]

The dynamics of this index has not been subject to significant changes over the past year. The parameters of the value of securities of type A and B on the Chinese stock exchange did not change. The maximum level of the index was reached in December 2020 - about 7200 units. The minimum level was recorded last May - below 6,000 units. This index is predicted to have some volatility. The volatility of the index will be up to 10%. The maximum values of the index will be about 7200 units, and the minimum up to 6400 units.

Next, consider the financial and industrial index of China - FTSE a50. This index includes companies from the financial and industrial sectors of the Chinese economy (a significant number of representatives of the secondary sector of the Chinese economy).

Figure 5. Dynamics and forecast of the movement of the FTSE China A50 index [4]

Analysis of the dynamics of this index indicates the possibility of a significant increase in the level of the index. Over the past year, the level has changed by more than 33% from values below 14,000 units to 20,000 units. It is predicted that this index will have growth prospects after the lifting of restrictions on the pandemic in the summer of 2021 and will exceed the value at the level of 21,500 units. It is planned that the index will peak during the reporting period of Chinese companies in the summer of 2021 - early and mid-August.

Figure 6. Graph of the spread of returns of MicroStrategy & Alibaba (%) [4]

The electronics technology, e-commerce and data exchange industry has enjoyed significant positive growth dynamics over the past year. Due to the pandemic, there has been a significant increase in the value of Bitcoin as an alternative means of protecting equity capital. This asset created a bubble in the electronic currencies market and overtook gold in value and prestige several times. MicroStrategy's shares rose significantly from June 2020 to February 2021. At the same time, in February-March 2021, the company's shares significantly adjusted by almost -50% in their value. Alibaba shares had almost a similar trend in the change in yields over the period under review.

Figure 7. Graph of the spread of profitability of biomedical companies (%) [4]

Medical sector companies also have a certain level of correlation in the movement of the price of securities. At the same time, the companies Moderna and Zenerba, which represent the United States, showed the greatest efficiency in terms of growth in the value of securities. These companies have attracted a large number of speculators throughout 2020 and have gained worldwide prominence for their products launched to the market. As for the medical device company from China, it had a neutral dynamic without significant fluctuations in the value of its securities.

Thus, it is important for the company to form effective investment portfolios that can be offered to the company's clients - legal entities and individuals, who are aimed at structurally managing excess liquidity through the stock markets. To do this, you need to select a set of securities, analyze their effectiveness and work out the issue of analyzing dynamic changes in the structural features of industries to diversify investment processes and generate income with a competent ratio of profit and risk.

References:

1. Markowitz H. M. Portfolio Selection: Efficient Diversification of Investment. Wiley. New York. 1959.
2. Markowitz H. M., Mean Variance Analysis in Portfolio Choice and Capital Markets. Basil. Blackwell. 1990.
3. 3.Regression analysis [Electronic resource] Access mode: http://www.machinelearning.ru/wiki/index.php?title=Regression (date of access 09/30/2021)
4. 4.Investing.com Securities and Indices [Electronic resource] Access mode: https://ru.investing.com (date of access 09/30/2021)
5. 5.HKEX (Hong Kong Stock Exchange) [Electronic resource] Access mode: https://www.hkex.com.hk/?sc_lang=en (date of access 09/30/2021)