An Empirical Study About The Stock Index Futures' Influence On The Stock Market's Volatility

Volatility is one of the most important characteristics in financial markets,the study on which has been a hot research in financial field.Generally speaking,the stock index futures is conducive to circumvent the system risk and reduce the volatility of the shares spot market ,but stock market crash in October 1987 in the United States causes people not to trust stock index futures anymore, therefore the research on the volatility of stock futures on the spot market has become a hot academic discussion in recent years.The simulation trading activities of Shanghai and Shenzhen 300 stock index futures started on China Financial Futures Exchange on October 30, 2006.Since then,the listed location,transaction subject and contracts designing of Shanghai and Shenzhen 300 stock index futures have had no problems,stock index futures'formal transaction is expected in the first half of 2008, but the specific date has been not determined. So the study on the volatility impact of stock index futures on the spot market has a direct practical significance for China's securities market.The article which start from this right point and is based on modern financial theory and doctrine begains with the prices relationship of stock index futures and spot market (the transmission efficiency of the information),the additional volatility and the up_to date effection, uses mathematical analysis and qualitative analysis and gives a profound description of the volatility relations between stock index futures and the spot market. In part of Empirical studies, we select two samples:S&P500 stock index futures as the mature markets of the developed countries,Mumbai SENSEX stock index as emerging markets which has the similar background with china's. We establish ARMA,GARCH model for each samples'data both before and after the introduction of stock index futures and analyse the efficiency of the information transmission.Then we amend the GARCH model innovatively through the introduction of virtual variables w in order to find out how the stock index futures influence price volatility of stock spot market. Through establishing model we conclude that: stock index futures can influnce the volatility of spot market in the short term because it improved the reflection pattern of spot market'information,but in the long term it will not affect the stock fluctuations. On the basis of empirical results we draw inspirations: we should continue to improve the spot market and strengthen the stock index futures market'risk control in order to make china'stock index futures market have a standardized development on a high starting point.