Estimating The Hedge Ratio Of ETF And Evaluating The Effectiveness Of The Ratio

With the rapid development of financial markets and the increasing number of financial derivatives, especially the issuing and listing of the CSI300 stock index futures, index spot investors have ended the historical predicament can only do "unilateral market". That means when the stock market falling into a bear market or expected market goes down occurs, index spot investors can hedge the systemic risk by building the opposite position in the futures market, so as to achieve the purpose of hedging. For now our variety of stock index, ETF is the most convenient product to hedging. it through fully copy some underlying index to reduce the non-systematic risk at the most. But the drawback is unable to avoid systemic risk, Such as cyclical fluctuations, interest rate changes and so on. However, there are high correlation between ETF's underlying index and the CSI300 Index. So, for the investors, the CSI300 stock index futures contracts will undoubtedly become the most important hedging tool. But, due to the financial derivative products adopt ma-rgin mark-to-market and trading system, So in the highly leveraged investment rate of return, the derivative itself has great investment risks. Therefore, how to hedging operation of scientific research is not only timeless research, also related to the vital interests of the majority of ETF investors.On hedging transactions, the most critical is to determine the hedge ratio, which means how large-scale positions investors intend to build in the futures market. In this paper, more comprehensive theoretical and empirical research has been done, by Compare static (OLS, VAR) with dynamic (CCC-GARCH, BEKK-GARCH),Get the hedging strategies that meet our current stock market situation. At the same time, combined with the hedging transactions on management way of China Financ-ial Futures Exchange and investor's financial situation, Further given technology roadmap for investors in China's stock index, for hedging operation has important theoretical and practical significance.This paper is divided into five parts:ChapterⅠ, Introduction:This section includes background and research topics of significance, domestic and international literature review, research methods and structural arrangements, the innovation of this paper four aspects.ChapterⅡ, the theoretical basis:This section focuses on three aspects; Firstly, this part describes the principles of ETF trading, hedging mechanisms and risk profile; Secondly, introduced the CSI300 stock index futures trading rules and principles of design. Finally, the introduction of the hedging operation precautions.ChapterⅢ, The choice of hedge ratio estimation model:This section primar-ily describes the spot and futures sample selection criteria and specific steps; gives the econometric model of the specific content; describes the evaluation method of hedging.ChapterⅣ, the empirical analysis:This part is the core of this paper, which mainly includes two aspects:Static strategy and dynamic strategy. Including the establishment and testing econometric models, empirical analysis of the results, the performance of two kinds of hedging strategies both in the sample data and in the out-side sample data.ChapterⅤ, Conclusions and Research Outlook:First, This chapter analyzes the empirical results derived from the previous chapter, and combined with the empirical results and our stock market system gives hedging technique roadmap. Finally, this paper studies the problem of hedging forward-looking section.The paper concludes:First, China's current ETF funds, whether static or dynamic strategies are very effective for avoid systemic risk, Systemic risk will be reduced at least 85% after hedging.Second, the performance of sample data and outside-sample data highly consis-tent, indicating that the current stock market have less smaller volatility, the data ob-tained by the sample can be use to estimate future market movements.The following are innovations in this article:First, sample more meet with actual market health, this paper selected the real CSI300 stock index futures transaction data as the sample, empirical results mo- re suitable actual operational situation of the market than simulation trading data which domestic scholars often used in the past.Second, Technology roadmap proposed. In this study of hedging transaction, Including the stock market regulations limit and the funds status of ETF invest-ors, And gives the hedging operations of technology roadmap,Truly a combination of theory and practice, rather than just compared the different results of the measu-rement model then given directly the conclusions.