An Empirical Study Of The Impact Of Stock-index Futures On The Spot Market Fluctuation

On April 16th 2010, the Shanghai-Shenzhen 300 Index Futures Contract was officially launched at China Financial Futures Exchange. By then, the stock-index futures, which China had been studying for eight years while preparing for four years, made its debut at the Chinese capital market. The launch of Shanghai-Shenzhen 300 Index Futures is bound to have profound impact on the securities market as well as the whole economy of China.This paper, based on the general rules and fundamental theories for the development of stock-index futures, studies the impact of stock-index futures on the short-and long-term fluctuations in the spot market. Firstly, this paper studies the basic theory for stock-index futures, aimed to better understanding of stock index futures and spot and futures of the index spot price and stock-index futures price. Secondly, it adopts the data of the emerging South Korea and Taiwan Markets, and employs GARCH model to conduct an empirical study on the impact of stock-index futures on the spot market fluctuations before and after the launch of the former. Meanwhile, as an associated research of the GARCH empirical model study, this paper, also compares the relations between stock-index futures and the long-term fluctuations in the spot market through schematic analysis. It comes to the following conclusions:the launch of stock-index futures has marked impact on the short-term fluctuations in the spot market, which will be intensified before and after the launch. With the continuous enhancement in market maturity, the impact will decrease gradually. Thirdly, this paper, using the same research methodology, empirically studies the impact of the launch of China Shanghai-Shenzhen 300 Index Futures Contract on the spot market fluctuation. Considering the short time period from its launch as well as the limited number, the study is still a study-and-judgment work. Finally, suggestions are put forward in terms of contract design, institutional building and risk prevention of the newly launched stock-index futures.