The Empirical Analysis On Hedge Ratio Of Stock Index Futures In China

Over the recent two decades of worldwide deepening financial innovation, stock index futures have becoming one of the most developed, prevailing and successful financial derivatives. Currently, there are hundreds of kinds of index futures all over the world and new products are coming into markets. The prosperous development of stock index futures is closely related to hedging, risk-free arbitrage as well as speculation, especially hedging, as an important instrument to hedge systematical risk, is popular in billions of investors. With the short mechanism, investors can hedge by using stock index futures. With the further development of China security market, all kinds of investors are expecting much on our domestic stock index futures, which gives birth to Shanghai-Shenzhen 300 stock index futures under this background. Its presence not only enriched domestic future products to offer more options for investors,but becomes an instrument for hedge, which must be a critical hedging instrument to mitigate systematical risks for institutional investors in their investment portfolios. At present, domestic research on the scientific hedge strategy is scarce and this subject is of great significance both in theoretical and practical areas. On the basis of stock index products titled IF 1009 and IF 1012 in Shanghai-Shenzhen 300 stock index futures since April 16th,2010,empirical analysis is conducted with the historical data of Shanghai-Shenzhen 300 stock spot index to estimate the optimal hedge ratio and hedge performance, also the factors that affect the hedge performance. By comprehensively exploring hedging strategy from a theoretical and empirical perspective, this paper intend to link theory to reality, discuss the all types of hedging models in depth, find out the key issues and points in practice to propose a model proper to domestic investors, hoping it to be a reference for institutional investors on stock portfolio hedging operation.This paper has 5 chapters, chapter 1 states the study background, research significance and study purpose. This chapter also makes a comparison between domestic and foreign literature on optimal hedge ratio, finding that the estimate of optimal hedge ratio is calculated from 3 perspectives. Foreign scholars, compared with domestic ones, studied widely with more approaches. Last, this chapter introduced study ideas and structure briefly.Chapter 2 analyzed the development and functions of stock index futures over the recent two decades under this background. Then great emphasis is placed on the emerging process of our domestic stock index futures. Also the features of Shanghai-Shenzhen 300 stock index futures and corresponding contracts available in April.16th,2004 are included in this chapter.Chapter 3 is the theoretical gravity of this paper, in which concepts on the hedging function of stock index futures are analyzed. First, classification is made by the types of investors, then the foundation to realize the hedging procedures including the principles, conditions, risks in hedging strategy. Moreover, the leading hedging theories are stated in academic domains to direct to 3 empirical models which can be a basis for empirical analysis.Chapter 4 is the empirical test, first the data and samples are introduced, then the main issue and approaches are illustrated, then the OLS model, B-VAR model, Single-variable GARCH model are employed to analyze the samples with given data, the hedge ratio and performance are measured to conclude the regression result.Chapter 5 makes conclusions and gives forward directions for the future investors.