Stock Index Futures On Stock Market Risk Prevention

I discuss the function which Index Future downsizes risks of the stock market in the paper. Index Future is a contract which to purchase or sell a stock index between two parties. The two parties trade a stock index at a certain time and price in the future. Index Future is a derivative. Index Future has two functions, including hedging and discovering price. But somebody think that Index Future have another function, speculation.China Financial Futures Exchange is funded on 2006.9.8. Shanghai-Shenzhen 300 Index Future simulation trade began on 2006.10.30. The article content of stock index futures is risk prevention.Through the four aspects:(1) the transfer of stock market index futures,(2) increased stock index futures market liquidity, (3) stock index futures price and the market price of the stock,(4) stock index futures market increased stability.I through empirical analysis:(1)Use of stock index futures for hedging can decrease stock portfolioβcoefficient and systemic risk in the proportion of total risk, and transfer of stock market risk. (2) I choose the Shanghai-Shenzhen 300 Index constituent stocks and the other stocks. I count them, the average price of the stock portfolio average rise significantly higher than the average price of the the other stocks. This shows that index future attract capital flow and attract outside the fund portfolio, increase the spot market liquidity. (3) The time is divided into rise period Sep 30,2006-Oct 17,2007; fall period Oct 18,2007-Nov 4,2008; stable period Nov 5,2008-Oct.30.2009.I use ADF methods, three time period stationarity test that 300 index and 300 stock index futures prices is nonstationary data. Then I made a first difference for smooth data. Then I Granger causality test again, get that during the fall period and rise period 300 index futures are leading to 300 index, and during the stable period the two are no causality. This shows, although 300 index futures are simulation trading, but it is a price guidance. Finally, I use the EG methods to calculate that there is no long-term equilibrium relationship between the two. (4) I compare the 1993 securities trading center of Hainan in Shenzhen composite index futures, Shenzhen A-share index futures, and 300 index futures market scale and system, Whether the market scale or system, the system of stock market than the stock market in 1993 to improve a lot. I believe that stock-index futures in long-term launch can increase the stability of the stock market.