Analysis of Factors Affecting Volatility of Chinese Stock Market

As China’s economy grows at the fast pace, China’s stock market gradually draws more and more attention of domestic and foreign investors. However, due to the short history of the development of China’s stock market, it is often affected by various factors. Volatility is a key financial indicator, in a mature and stable stock market volatility should be moderate. However, abnormal stock volatility can cause great harm to the stock market itself. On the one hand, frequent and violent volatility makes investors difficult to make correct investment decisions, as a result of which investors lose confidence and then withdraw from the stock market. On the other hand, abnormal volatility will affect the distribution of resources in the stock market and increase systemic risks of the entire financial system, which in return bring out economic crises. Therefore, the research on the stock volatility of return and its influencing factors has been one of the important issues in the field of modern finance. Since the establishment of China’s stock market, the stock prices are abnormally volatile frequently. This article analyzes the factors affecting the volatility of China’s stock market, and conducts a theoretical and empirical study of the factors causing abnormal stock volatility. The research aim of the paper is to provide new ideas and suggestions for studying abnormal volatility in the Chinese stock market, and it may be helpful for investors, listed companies and government regulators to make more rational and correct decisions, taking into account the factors affecting the stock market. In this article, the Shanghai Stock Exchange Index is selected as the subject of research, and event study method and Levene test are used to analyze the factors affecting the volatility of China’s stock market, as well as to study how various factors affect the volatility of the stock market. The results of the study showed that in the short term stamp duty, interest rates, the trade war between China and America, and Covid-19 affected China’s stock market to some extent. The impact of the stamp duty and interest rates on stock market volatility is controversial. The impact of the trade war between China and the United States, and impact of the coronavirus, depends on the nature of the events. In general, the impact of positive events is weaker than that of negative events. Key words: event study, volatility of the stock market, Levene test, accumulated abnormal return