Abstract: This paper decomposes the volatility of the Chinese A share and H share into three components: long-run volatility, short-run volatility and jump volatility by ARJI-Trend model, respectively. The paper uses the indices yield data from A share and H share from December 2003 to December 2010, and finds that both markets have long-run volatilities with highly persistence. The short-run volatility on H share and the jump volatility on A share take up a large proportion of the market risk, respectively. Moreover, there are two-ways spillover of the short-run volatility between two markets and one-way spillover of long-run volatility from A share to H share. Additionally, investors are heterogeneous between the two markets on the prediction of rare events. The investors can borrow these results to construct portfolio strategies.