The Impact Of Introduction Of Stock Index Futures On Cash Market.

After entering 1990s, with the increasingly globalization of international capital circulation, institutional investors become the leaders on the financial market gradually, thus people have put forward higher demand to risk management tool and means. Under this background, developed security market and new developing security market competitively offer stock index futures, and the worldwide stock index futures upsurge has appeared. Chinese stock market is just set up for more than ten years, and because the unripe and nonstandard market makes stock price often fluctuate violently, its systematic risk is very surprising. So, the Chinese stock market needs a financial instruments which can evade the systemic risk of stock market effectively very urgently ----Stock index futures. Especially after entering 2001, with the introduction of the open-ended fund, the increasing of the risk of stock market, the entering of social insured fund to security market and joining WTO, the voice of introducing the stock index futures is higher and higher. Then, should our country put out the stock index futures? What kind of influence is brought to spot market to develop stock index futures? How to dispel the negative effect that the stock index futures bring effectively? These questions are all important problems that can't be avoided in the construction of Chinese financial market. Beginning with the universal law and basic theory of futures, taking the analytical method of combining the theoretical research and empirical studies, utilizing the experience of the new developing market introduces the stock index futures, the article studies the influence on the spot market by introducing stock index futures, and proposes relevant policy recommendations to the decision, design and supervision of the development of stock index futures market. The full article divides into six chapters altogether: Chapter one introduces the subject background, current situation studied both at home and abroad, and the concrete thinking and frame that this article studies. The focus of the article are evaluating and analyzing the theories and empirical studies of the influence on the spot market by introducing stock index futures, and the basic thinking and frame of this article appears on this basis. In chapter two, we analyze the reason why the stock index futures produce, and the function orientation of the stock index futures through reviewing the production and development of the stock index futures. Beginning with the phenomenon that "only a few goods are traded in the future market", combining the background and reason that the stock index futures produce, this chapter studies the function orientation of the stock index futures. The basic conclusion is, the future market develops on the basis of spot market, and act different functions in the economic system. Concretely, the future market offers four kinds of extra functions for financial market: (1) dispersing the risk effectively and keeping the integrality of the market; (2) reducing the transaction cost and raising the distribution efficiency of resources; (3) reducing the impact on investor of the information asymmetry in the stock market; (4) price finding. In chapter three, we study some basic terms to establish the stock index futures, and then analyze the specific conditions and groundings for our country to develop the stock index futures market. From the successful experience of other nations, we can conclude that in order to establish stock index futures exchanges successfully, some conditions are to be met, including the normal security market, a large number of potential participants, tight regulation and supervisory system, proper object index and the design of the standardized futures contract, tight regulation, supervisory system and strict supervision of the market. According to actual conditions of the security market of our country, some shortcomings still exist, such as: the scale of stock market is small, there are mostly individual investors in the market, market and stock right are cut apart, lack the generally acknowledged nationwide unified index, the laws and regulations are imperfect and market supervision is weak, etc. All these weakness restrict stock index futures'putting out. In addition, considering the present future market is also at primary stage of the norm and development, this text has put forward the still unsuitable view of putting out the stock index futures in our country. The forth chapter deals with the impact on the spot market by introducing the stockindex futures product. Firstly, assuming a stock market with lasting time, there is two kinds of investors, namely liquidity suppliers and liquidity demanders. This chapter studies how the trading strategy change as the result of the introducing of stock index futures, and then explains the liquidity and fluctuation of future market and spot market when the two markets achieve dynamic equilibrium. The main argument is, the impact on the stock market by introducing future market depends on the correlation of liquidity demands of two markets and the investor composition of two markets. First of all, if the liquidity demand of two markets is highly negative related, liquidity suppliers face less risks and require less risks premium. So introducing the stock index futures can increase the liquidity of the stock market and reduce the fluctuation of the stock price. However, liquidity suppliers'utility will be reduced because of only getting less risks premium. On the contrary, if the liquidity demand of two markets is positive related or weak negative related, introducing the stock index futures can decrease the liquidity and increase the fluctuation. Liquidity suppliers will improve utility because of getting more risks premium. Secondly, the composition of the participant in the market will change the impact on stock market of introducing the stock index futures. We subdivide the liquidity demand persons into two kinds: (1) risk evaders; (2) Noise dealers. Introducing the stock index futures doesn't influence risk evaders'demand for total risk assets; as to noise dealers, it makes their irrational speculation behavior enlarge. When there are noise dealers in the market, total liquidity demand that liquidity suppliers face will increase, and the total risks will increase too, so it requires more risk premiums,. The result is the liquidity of stock market decrease. Meanwhile, the sensitivity of the price reflects the volatility of the stock price. The higher the risk premium is, the higher the sensitivity of the price is, the higher the volatility of the stock price is too. The higher volatility makes liquidity suppliers get more risk premium, so the utilities will increase. Finally, because the main participant of the Chinese stock market is made up of speculator, the liquidity demanders in the stock market include a lot of noise dealers. The introducing of the stock index futures will reduce the mobility of stock market and increase the volatility of the stock price, but noise dealing could improve liquidity suppliers' utilities. The fifth chapter deals with the impact on the stock spot market by introducing the stock index futures utilizing empirical studying, and then provides reference to the policy makers as far as the stock index futures is concerned. To test the policy effect of introducing stock index futures, this chapter chooses the Taiwan stock market as the...