The Empirical Study On Hedging Of Stock Index Future

Chinese securities market made its debut in early 1990's. However, due to lack of hedging instruments and short-sale mechanism, the securities market has a characteristic of one-side market for a long time, which means investors only make profits when stock prices rise and they will have to endure passively the loss or withdraw from the market when stock prices fall. Fortunately, the foundation of China Financial Futures Exchange (CFFE) in 2006, marked for the launch of a stock index future with an underlying index of CSI 300 index into calendar formally. Stock index future traces to twenty-five years ago and it's been gradually one of vital financial derivatives to hedge risk in international market. Undoubtedly, the launch of CSI 300 stock index future has great significance to the local securities market. On one hand, investors can make profits from short-sale and on the other hand, investors can evade risk through stock index future, that's so called hedge.The layout of my thesis will focus on hedge, the fundamental function of stock index future and extremely emphasize the study orientation of practice based on academic papers. One key subject is, how to operate hedge process and estimate hedge ratio and evaluate hedge effect. The other one is, how to solve the problem of un-stability and time-volatility forβin investment portfolio, to evade its side-effect for estimation of hedge ratio and improve the effect and accurateness of hedge. Since the simulation trading of CSI 300 stock index future has lasted for almost one year, my thesis will have empirical analysis and test on those key points, based on simulation trading data.In general, this paper includes several parts, shown as the following:The first part summarizes the background and outline of stock index future and introduce briefly its local status and CSI 300 stock index future contract.The second part has a retrospect of the main academic papers of both local or overseas, and also a discussion of relevant hedge strategies and models, to lay a solid theoretical foundation for the empirical analysis and test for the operation process of hedge in latter parts.The third part outlines the principle, key factors and real operation process of hedge. Moreover, it makes a empirical analysis on popular hedge models with HK Hang Seng index. In the end, it test the hedge effect of trading on IF0706, CSI 300 stock index future contract, with CCB select-growth securities fund as present underlying. The fourth and also the last part, explores how to define hedge ratio in china mainland market. It includes the stability test ofβfor local securities portfolio, adjustment of historicalβand best data length for estimation of historicalβ, etc. Also, the thesis makes some beneficial experiments on the definition of best data length for estimation of historicalβ, survey of fashion forβand variation for industryβs. Fortunately, it's got some meaningful results.