Stock Index Futures Research, And Financial Security

Following the introduction of Kansas City Value Line Index Future (KCVLIF) in February 24, 1982, stock index futures has been developed quickly around the world. The market of stock index futures has been the main component of the financial market, it promotes the deepening of the financial market and the perfection of the market mechanism. From the later half-year of 1999, many scholars in China have been discussing the link between stock index futures and stock market volatility. Critics of stock index futures assert that index futures trading will increase the volatility of its underlying spot market and produce financial crisis so to endanger financial safety of our country.Through the empirical study of the Hong Kong stock index futures, this paper is to announce to both regulators and investors as follows: stock index futures is neutral in the nature, and we should bring its active role to the developing of spot market and protecting of national financial safety in the largest extent, and not pay attention to its negative influence partly; we also find the Hang Seng index futures does not increase volatility of spot market.This paper is divided into six chapters as follows. Chapter one summarizes the basic characters of stock index futures and reviews some documents. Chapter two introduces the development of stock index futures of overseas, Hong Kong and mainland of China. Chapter three discusses the relation between financial safety and stock index futures. Chapter four studies price volatility of Hang Seng Index through analyzing the 19-years economic data of Hong Kong of China. Chapter five examines whether stock index futures trading increases the volatility of its underlying spotmarket. Chapter six summarizes the main conclusions of the study and provides five suggestions on policy.This paper brings three major contributions as follows.1. This paper analyses and studies the August 1998 battle of Hong Kong of China systematically and in details, and provides my own opinions on the relation between stock index futures and financial safety. 2. Through the empirical study on the 19 years economic data of Hong Kong in China, this paper sets up stepwise regression function and receives some new conclusions. 3. Unlike most of the studies of internal scholars which mainly concerned with the stock index futures in quality, this paper use empirical study to examine the effect of the introduction of stock index futures on the volatility of its underlying spot market.However, there are also some limitations which cannot deny in this paper, for example, the data. In the later study, we hope that we can study the stock index futures in different aspect if we have enough data.