| By initially introducing stock index futures'influence on the volatility of stock index spots markets, this article subsequently presents deep research into factors which show close relationship with the volatility, i.e., stock index spots'systematic risk, positive feedback trading effects and market effectiveness, and their changes and performances after the launch of stock index futures. Stock index future is the future contract targeting in stock indices. The specific contract stipulates that the two trading parties commit in a certain number of stock indices dealings at a certain time as committed. As a result, stock index future categorizes into financial derivatives. It is reckoned in academic circles that stock index futures trading influences on spots markets in the form of avoiding risk, price discovery, and etc. However it is also criticized for the characteristic of speculation. It's never been agreed upon whether stock index futures magnify price volatility of spots markets. Accordingly, the paper initiates with the research of spot market volatility.Shanghai security composite index has experienced 1162 points at the beginning of 2006,6041 points on 16th Oct,2007, to 1665 points on 28th Oct,2008. Stock indices'fierce fluctuation, with the impulse of international financial crisis triggers investors'appeals to hedge risk. Under three years'thorough preparation, Stock index futures debut on Chinese A-share stock market on 16th April,2010. After one year's cultivation, the extent of stock index futures'influence on A-share has still been a question mark. So by virtue of international experience, it is of great academic and actual significance to research into stock index futures'influence on stock market volatility and other relative features, as well as utilizing the current shanghai and Shenzhen 300 stock index futures.Under this background, this paper selected 15 global core stock indices and shanghai & Shenzhen 300, and accordingly analyze upon four factors such as volatility, systematic risk, positive feedback trading effects four years before and after the stock index futures'listed day. This paper is structured as six chapters. The first two parts are research basis. And the next three are dedicated to analyze the problem, with the fruit of four main conclusions. (1). Stock index futures have little influence on stock index spots; (2). Stock index futures can lower the systematic risk of spots; (3) stock index futures can mitigate the behavior of positive feedback trading and reduce trading risk; (4).stock index futures improve the market efficiency of spots markets and lower the correlation of the daily returns. The last chapter is the conclusion which proposed some shortage of this article.Furthermore, by positive analysis and the characteristics of emerging and developed markets, it is concluded that (1) after the launch of stock index futures, positive feedback trading effect is reduced to more extent in developed markets than that in emerging markets. It is due to the application of hedging in developed markets and the market effectiveness itself. (2) It is the reduction of positive feedback trading effect that leads to the reduced trading costs and market risks. As a result, in the analysis of stock indices'systematic risk before and after the launch of stock index futures, positive figures also demonstrate that after the launch of stock index futures, systematic risk is reduced to more proportion and extent in developed markets than that in emerging markets. (3).reflecting on emerging markets, due to the positive feedback trading and herd effect, market effectiveness is relatively low and market volatility is high, stock indices'volatility in emerging markets is reduced apparently after the launch of stock index futures. It also can be mainly explained that currently shorting investors have new channels to make profits by expressing their ideas, so that the bubble can be reduced. (4). In the meantime, because of low market effectives and the correlation of daily returns are high, after the launch of stock index futures, the increasing of information dissemination velocity and efficiency has improved all market effectiveness globally to different extent. Furthermore, emerging markets effectiveness increase by more proportion and to more extent than developed markets.Putting all the analysis upon main global indices above into Shanghai and Shenzhen 300 index, positive analysis demonstrates that:(1) like any other emerging markets, Shanghai&Shenzhen300 index's systematic risk has not experienced obvious changes after its launch in the market. And it was obvious increased in the long run. It's because stock index futures bring in shorting mechanism. Compressing stock index bubbles leads to shanghai and Shenzhen 300's leaning negative abnormal return towards shanghai security composite indices. (2) Similarly, positive feedback trading effect shows signal of reducing, just like other global indices, but not so significantly just as emerging markets. (3) The effectiveness of A Share market increased in the long run. Above all, it is believed that stock index futures have significant positive effect on A share market development and that to improve market supervision mechanism can further utilize other core functions of stock index futures. |
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