Thickness of Tail Index of China Stock Markets

This paper analyzes tail index of high-frequency returns of SSE Component index of China stock market by using two-step resample bootstrap method. As the results show, tail index estimators of Shenzhen stock market are generally greater than two but smaller than three, and vary with sampling frequencies, i.e. the shorter the time interval, the smaller the tail index, indicating heavier tails. It could be reflected that there is a high probability for extremal events to take place in China stock markets and the markets are not efficient enough to absorb big external shocks. In addition, through analyzing high-frequency returns of six individual stocks, it could be concluded that the tail index estimators of super stocks are larger than those of smaller ones, demonstrating that smaller stocks are more fragile to extremal events.