The Launch Of Stock Index Futures On The Spot Market

Nowadays,there is severe stock price fluctuation as well as great systemic risk in China's stock market.Domestic investors are in urgent need of financial derivative products for avoiding risks.As the second largest financial derivatives next to interest rate futures,stock index futures provide investors effective way to spread risks and allocate resources efficiently on one hand,and become controversial for its high-leverage and high-risk characteristic on the other hand.Although China has not launched stock index futures so far,the general trend is to deepen financial market reforms and to encourage financial innovation.Therefore,it is necessary to study its potential impact before the formal launch of stock index futures.From the perspective of financial market factors,this paper takes empirical analysis of the impact of stock index future on investors,stock prices,volatility of stock index and stock market media by time-series models,using Taiwan market for case study which is similar to China's economy.The purpose is to provide references for the development of China's stock index future.The major tasks in this paper are listed as follow.This paper takes daily data of Taiwan weighted index future for samples.In order to study the impact of stock index future by comparison,this paper divides the sample interval into two sub-intervals which are July 2,1997 to July 20,1998 and July 21,1998 to February 29,2008 separately.In addition,this paper uses the positive feedback model to study the impact on investors, and uses GARCH(1,1) model and TARCH(1,1) model to study the impact on volatility and non-symmetry volatility of stock market separately.Finally,this paper analyses the impact on the securities companies in theory.The main conclusions are listed as follow.First,stock index futures reduce the non-synchronous trade and market friction,and weaken the influence of positive feedback trading in the process of stock price formation.Second,stock index futures increased volatility and non-symmetry volatility of stock market.Third,stock index futures accelerate the speed of information transmission.Fourth,stock index futures give securities companies both opportunities and challenges.