Stock Index Futures, Stock Market Volatility Mechanism For Analytical And Empirical Test

Stock index futures market copy the spot market trading in future trading mode, and is serving for the development of stocks market. Its function on hedging risk and stabilizing markets operation get more and more attention and it has been the basic derivatives and the important component of the stocks market's inherent stabilization mechanism. Stock index future begins its operation in domestic market at April 16,2010. Deeply research on its function of stabilization is more important both theoretically and practically.Under this background, this paper discusses stock index futures market's effects and their mechanisms on stocks market's stabilization. In structure, this paper includes eight chapters and four parts. (1) Research foundation includes the first and second chapter; (2) Research spread includes the third to the sixth chapter, this is the main body of this paper. To be specific, the third chaper finds the problem that the launching of stock index futures do not greatly change stocks market's volatility actively. The forth and fifth chapter analyze this problem form the aspect of risk management and price discovery respectively. The sixth chapter solve this problem by suggesting that the effect of stock index futures on positive feedback trading in stocks market is suitable to working as the new point of view to look into stock index futures'market stabilization function.;(3) Research deepening includes the seventh chapter, looking into stock index futures market's stabilization function during this financial tsunami;(4) Research conclusion includes the eigthth chapter.This paper's conclusions are as follows. Firstly, volatility is not the suitable criterion to judge stock index futures'influence on stocks market's operation. The empirical test on 12 markets based on EGARCH and TARCH model indicates that the launching of stock index futures does not increase its volatility as a whole, and even does not change its volatility very much, for the volatility of a large part of markets in the empirical test does not change observably. This is coincident with the research results before. Secondly, stock index futures'risk management function is helpful to decrease the volatility of stocks market. The empirical test on ten global indexes indicates that stock index futures'effect to reduce the system risk of underlying indexes is remarkably. Exactly, stock index futures'effect to reduce the system risk of underlying indexes is more remarkable in nature market; that effect of market index futures is more remarkable than industry stock index futures; stock index futures launching overseas can also reveal this function. Stock index futures and stock short selling both provide the short selling mechanism, but have great differentia, and stock index futures'risk management efficiency is higher. Thirdly, the effect of stock index futures'price discovery function on the volatility of stocks market is not clear as that of risk management function. Stock index futures' price discovery function can make the stocks market fluctuate accordingly to reflect the change of market information in capacity and velocity of flow. Also, stock index futures'price discovery function can make the stocks market more stable by providing the pricing reference and hint and absorbing information impact earlier. Fourthly, the effect of stock index futures on positive feedback trading in stocks market is suitable to working as the new point of view to look into stock index futures'market stabilization function. It is a more rational angle, and is the micro-behavior-foundation of stock index futures'market stabilization function, including all the influence of stock index futures on stocks market stabilization by the channel of trading executing, risk management and information diffusion, and eliminating effectively the active and healthy market volatility influence as the results of information efficiency improvement, and pointing directly to positive feedback trading which make the stocks market fluctuate unduly. The empirical test on ten indexes in eight markets based on the positive feedback model indicates that stock index futures can restrain stocks investors'positive feedback trading behavior effectively, who buy when the stocks market goes up and sell when it goes down. Its mechanism includes five points, namely improving the information efficiency, transferring positive feedback trader from stocks market to stock index futures market, optimizing investment management mode to liberate some investors from executing positive feedback trading passively, restricting the price space of positive feedback trading by arbitrage, and reducing positive feedback trading with reducing of the volatility of stocks market. Fifthly, discussion on idiosyncratic conditions, such as performance in crisis, deepens our research. During the financial tsunami, global stock index futures market helps relieving the poignant fluctuation of stocks market. Data from CFTC's large clients report reveals that a lot of institution investors make use of stock index futures in crisis for hedge. Stock index futures'markets stabilization function is realized through the mechanism of hedging, price restrain, price indication, expectation stabilization and liquidity providing.The most important innovation of this paper is that research on stock index futures market's stabilization function is spreaded in three aspects, namely absolute criterion (volatility), comparatively criterion (system risk) and behavior criterion (positive feedback trading effect), and is deepened in this way, digging out the behavioral foundation of stock index futures market's stabilization function well and truly and providing a more rational criterion. The research and its conclusions are of originality and meanings. Moreover, based on diversified methods and modles, such as the VEC model, IS model,PT model, regression analysis and GARCH(EGARCH,TARCH) model, the research on Hong Kong China markets reveals diversified conclusions; empirical tests are executed in a large scope, including 20 indexes in 13 markets and providing complete and plenty conclusions; the research about S&P500 index futures during financial tsunami also provids novelty conclusions.