An Empirical Research on the Influencing Factors of Long Memory of Volatility Process in Chinese Stock Market

Based on the ICSS method, the existence of long memory and structural break is tested in Chinese stock market for Shanghai synthesized index and Shenzhen composite index. Both parametric and semi-parametric methods are used to estimate the long memory parameter for variance process of daily returns. While long memory is evident in the variance processes, there is some evidence of long memory for break-free series, although the degree of persistence is weaker. A structural break analysis reveals that this feature is partially explained by unaccounted changes in regime.