Research On Stock Index Futures Hedging

April16,2010, China launched the first financial futures contracts---CSI300stockindex futures contracts. It means that Chinese capital market has achieved a leap forwardto the era of financial futures. The CSI300stock index futures allow short selling, whichcan provide a rich portfolio to investors. The most important is that its hedging functionwill be able to meet the investors’ need, for it can help them to avoid the market risk.However, the Chinese stock index futures started late, and the investors lack the knowledgeof its function. This article focus on the hedging function of stock index futures, it selectsthe real transaction data of CSI300stock index futures market for empirical analysis.Firstly, the article introduces the stock index futures’ functions and features, as well as thedevelopment status of Chinese CSI300stock index futures market. Secondly, the articleuses the unit root test and cointegration test to verify the relevance of the CSI300stockindex spot and futures markets, and finds there exist a long-term stability cointegrationrelationship between them. Thirdly, the article respectively uses the OLS model, VARmodel, VECM model and GARCH model to estimate the optimal hedge ratio, andevaluates the hedging effect of the above four models from the point of view of yield andvariance. Finally, the article gives some appropriate conclusions, and puts forward thecorresponding recommendations for investors using stock index futures to hedge.