Research On The Time Varying Characteristics Of The Stock Index Futures Market Functions Based On The Margin Trading

Margin financing and securities lending transactions were implemented in the stock market of China on March31,2010, which has changed the unilateral market pattern of stock market.On the other hand, the stock index futures market has been established in China on April16,2010, which has improved the capital market structures and the capital market functions.Since then, the margin financing and securities lending transactions and the stock index futures have coexisted in our capital market.Then, how will the margin trading of securities influence on the stock index futures?Under the background of the margin trading, what will be like of the stock index futures market functions including the hedge function, the arbitrage function, and the price discovery function, and so on?Which kind of time varying characteristics of the stock index futures market will appear?How will the investors carry out the trading strategy on the spot and futures markets? The paper aims at these series of questions, carries out the mathematical deduce and the empirical study with the data from Shanghai and Shenzhen300spot market and stock index futures market to find the answers. Through these researches, it indicates the development directions and ways of the securities and derivatives in China, it provides the valuable policy-making basis for the effective supervisions, it helps the investors of stock markets and futures markets to make discisions correctly to invest, to hedge and to arbitrage, and at last, it riches the valuable related literatures for the functions of stock index futures based on the margin trading.The paper mainly studies the functions of stock index futures including the hedge function, the arbitrage function, and the price discovery function and their time varying characteristics under the background of margin trading.In the first chapter of the paper, the research background, the research significance, the research subjects, and the research frameworks are introduced. The paper especially emphasizes the research backgrounds. That is to say. the margin financing and securities lending transactions and the stock index futures transactions are the unique research backgrounds. And to find the time varying characteristics of the stock index futures market functions is a very important problem.In the second chapter,many literatures including the literatures on margin trading,the literatures on hedge function,the literatures on arbitrage function,the literatures on price discovery function,and the literatures on time varying are introduced and reviewed.In the third chapter of the paper, some related basic categories and concepts are carried out, including the margin financing and securities lending transactions, the stock index futures, the Shanghai and Shenzhen300stock index futures transactions, the stock index futures’functions including hedge function, arbitrage function, and the price discovery functions.How the margin financing and securities lending transactions influence on the stock index futures’functions,and what time varying characteristics of stock index futures functions appear in China stock index futures market have also been theorical analysised in the chapter3.And the fourth chapter studies the hedge function and its time varying characteristics of the stock index futures market under the margin financing and securities lending transactions, Using mathematical model’s deducing, it is found that margin financing and securities lending transactions affect the hedge direction, the hedge cost as well as the optimal hedge ratios (quantities) of the stock index futures. With the data from the Shanghai and Shenzhen300spot and futures market,the hedge ratios and hedge effectiveness of the stationery hedge model including OLS model,VAR model,VECM model and the dynamic hedge model including the BGARCH model,ECM-GARCH model,Modiffied ECM-GARCH are studied and compared based on the margin financing and securities lending transactions. The conclussion is drawn that the dynamic hedge models are more effective than the stationery hedge models,that is to say,the time varying charateristics of stock index futures market hedge function is significant.The fifth chapter studies the arbitrage function and its time varying characteristics of the stock index futures market under the margin financing and securities lending transactions. Because only the Shanghai and Shenzhen300index futures exists in Chinese stock index futures market, arbitrage and spread opportunity can be found. The margin financing and securities lending transactions influences the upper and lower bounderies of the non-arbitrage intervals, and it influences the arbitrage opportunity and arbitrage degree. By using the forward arbitrage principle to determine the upper boundery, using the reverse arbitrage principle to determine the lower boundery, and using the MPR to reflect the degree of the stock index price deviates from the non-arbitrage intervals, the paper then presents the arbitrage opportunity and arbitrage degree and their time varying characteristics during the development of the stock index futures market and during the stock index futures contract existing.The sixth chapter studies the price discovery function and its time varying characteristics of the stock index futures market under the margin financing and securities lending transactions. Generally speaking, the price discovery mainly includes two aspects:Different reactions rate of different market to recent information; the ratio of recent information integrates into different market prices. In the ordinary circumstances, the stock index futures markets and the stock markets have different price discovery capacities. The insider traders’choosing the different microscopic structure market to exchange mainly have four kinds of reasons:Release lever, transaction cost, uptick rule, market systematic information, which determin that the price discovery capacity of the stock index futures market surpass that of the stock market.But when taking consideration of the margin financing and securities lending transactions, something will be changed. Margin financing and securities lending transactions have the release lever transaction and the low transaction cost characteristic, which changes the four hypothesises, and the changes the price discovery function of the spot market and futures market.The paper studies the lead-lag relationships between the stock index futures and the stock market,the price discovery contribution of spot and futures market.and their time varying characteristics under the margin financing and securities lending transactions during the development of the stock index futures market and during the stock index futures contract existing.In this paper, the innovations and contributions are as follows:(1). The paper has systemly analysized the mechanism of margin trading influnce on the stock index futures market functions.The margin trading influences hedge function,arbitrage function,and price discovery function of stock index futures with different mechanisms.(2)The stock index futures market functions including hedge, arbitrage and price discovery and their time varying characteristic based on margin trading have been studied.(3).The time varying characteristis of the stock index futures market functions during the development of the stock index futures market and the existing period of the stock index futures contracts have been studied.(4).In different perspectives,the stock index futures market functions and their time varying characteristics have been studied,furthermore,the paper studies the optimal hedge ratio and hedge effitiveness,studies the arbitrage opportuniy and arbitrage degree,studies the price discovery capacity and price discovery contribution.Some problems in the paper haven’t been solved, including:(1). The studies period should become longer.Because the margin financing and securities lending transactions and the stock index futures have been existed only two years,longer periods,more stages,higer frequency data should be used in the future studies.(2).The stock index futures functions except the hedge function,the arbitrage function,and the price discovery function should be studied in the future.(3).The securities potifolios choices in the hedge function and the index tracking in the arbitrage function of stock index futures should be studied in the future.