A Research into Stock Market Volatility Using Threshold GARCH Model

Taking the Shanghai stock market A-index returns data as a sample, this paper analyzes the volatility behavior of the Shanghai stock market returns using the threshold autoregressive conditional heteroscedasticity (T-ARCH) model. This paper compares the performance of the autoregressive conditional heteroscedasticity (ARCH) model in different stages based on the threshold theory. This paper finds that the volatility behavior of the market index returns varies with respect to different market stages and the development of the Shanghai stock market has multiple stages. This paper supports that dividing market according to different thresholds is able to reduce the risk of the investors so as to yield desirable investment outcomes.