A Study About The Index Future's Influences On The Stock Market

Stock index futures is an important financial derivative instruments, which has great impact and application in the world financial market. To sum up, the world's major types of derivatives include futures, options, forward contracts and swaps. As the three major financial futures (foreign currency exchange rate futures (1972), interest rate futures (1975), stock index futures (1982)), Stock index future is the last one with development of less than 30 years but have been a very mature and important financial products in global financial derivatives markets, regardless of the size of the transaction or transactions in both species leading to other derivatives. 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.In April 2010, China has finally launched her index future in the China Financial Futures Exchange:the HS 300 stock index futures and this has been the 4th year since the index future simulation system has began to run. But this is only one step of a long march, because at now for the index future, the scope of participation has not given specific details, especially for the participation of organizations and the constraints for the participation is complex, and the future products is few. And the reason why 4 years have passed when the real index future is come out and why there are so many limitations on the participation of it is that there is not a clear and unified view about the impact of index future on the stock market.The article which start from this right point and is based on modern financial theory and doctrine begins 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 affection,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:Mumbai SENSEX stock index as emerging markets which has the similar background with China's Nikkei 225 stock index futures as the mature markets of the developed countries. We establish ARMA,GARCH model for each samples'data both before and after the introduction of stock index futures and analyze 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 influence the volatility of spot market in the short term because it improved the reflection pattern of spot market's 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.