A Study Of China’s CSI 300 Index Futures Price Discovery

Price discovery is one of the most important functions of futures market,which is the basic condition to achieve hedging function and ensure futures markets esxist continuously.Because of this,it has been one of the hot topics the regulatory authorities and domestic and foreign scholars to study and discuss.This article focused on two aspects for the research of price discovery function:the first, the lead-lag relation between futures price and the spot price;the second,the contributions of futrues market and spot market for price discovery. The former focuses on the direction of price changes, the article uses cointegration test, vector error correction model (VECM), generalized impulse response and variance decomposition based on VAR to analyze it;the latter focus on the number of price changes, the article uses the information share model (IS) and permanent-temporary moedl(PT) to analyze quantitatively.The results of this study confirmed that China’s CSI300 stock index futures has the stronger price discovery ability and the more contribution for price discovery than the spot market, futures price lead the spot price, stock index futures market palys a dominant role in price discovery. The outcomes, are not only associated with the operating mechanism, system design, investment structure and dealing size of stock index futures market, but also with the marketing time and the development status of China’s stock market. In order to make the price discovery of China’s stock index futures markets show better, it should continue to improve market liquidity, allow more institutional investors to come in and expand the market transparency,and let all information flow rapidly between various markets as much as possible.