An Empirical Study Of The Volatility And Spillover Effects Of China's Stock Index Futures

Stock index futures are one of financial derivatives. Their targets are stock price indexes. The world's first stock index futures contract was launched in February 1982. Because the stock index futures have functions of avoiding risks, price discovery and hedging, they are welcomed warmly since being listed, and being flourished in1990s. China Financial Futures Exchange was set up in September 2006, and Simulation of the Shanghai and Shenzhen 300 stock index futures trading was released quickly. China launched CSI 300 stock index futures on April 16, 2010. Therefore, the research to volatility spillover of stock index futures has a very important practical significance.The objects are China's CSI 300 index and CSI 300 stock index futures. On the bases of analyzing price guiding, we further research empirically their volatility spillover effects. Firstly, we choose S&P 500 stock index futures and spot index when analyzing price guiding relations for comparison. Using daily data, we study the price guiding relations between the two markets, by the methods of Granger causality test, co-integration test and error correction model. The empirical results show that: CSI 300 stock index futures market lead the spot market, yet S&P 500 spot market lead S&P 500 stock index futures market. Secondly, considering the number of daily data may have limitations, we further use five minutes of high-frequency data to retest price guiding relations between China's stock index futures market and spot market. The empirical results show that: the CSI 300 stock index futures market and spot market are mutually reinforcing. Thirdly, using the BEKK-MGARCH model and DCC-MGARCH model, the paper empirically analyzes the volatility spillover effects between China's stock index futures market and spot market. The empirical results show that: there are obvious volatility spillover effects between the two markets. And with the development of stock index futures market, the volatility spillover effects indicate a gradual weakening trend. Finally, we get some conclusion, and we provide some policy recommendations to China's stock index futures market.