Statistical Analysis And Empirical Study On The Minimum Variance Hedge Ratio Of Stock Index Futures

Since the HuShen300stock index futures was developed in the China Financial Futures Exchange, it has played an important role in the market. As an important risk management tool, financial futures has the basic function of avoiding and defusing the systemic risk faced by the spot asset position. However, the hedge ratio affects the hedging effectiveness of portfolio. In order to maximize the reduction of price volatility, It is necessary to find the optimal hege ratio.In this paper, with the purpose of minimizing returns risk, empirical analysis of the optimal hedge ratio for Chinese stock index futures market is evaluated through estab.ishing minimum variance hedging models.This paper briefly describes the principle of minimum variance hedge model of portfolio composed of spot and futures positions, and gives the models and methods used to estimate the optimal hedge ratio. These models mainly includes:the ordinary least square model (OLS), least-square regression error correction model (OLS-CI), vector auto-regression model (VAR), the error correction model (ECM), generalized auto regressive conditional hetero-skedasticity model (GARCH) and error correction GARCH model (ECM-GARCH) and so on. In this paper, the CSI300index and stock index futures is regarded as a hedging portfolio, and an empirical analysis is evaluted to find the optimal hedge ratios for the portfolio. In the empirical analysis, the paper mainly builds model of price series using time series analysis method, then tests and analyze the estimation results of model. The methods include stationary test of variables, significance test of parameters, correlation test and heteroscedasticity test of regression residuals.Finally, The hedging effectiveness under different models is compared based on variance reducing of the portfolio returns after hedging, and application of different methods is validated on Chinese stock index futures market. The empirical results indicate that:the utilization of of futures hedging can significantly reduce revenue risk of the stock, comparing performance of in sample and out of sample, the dynamic model BGARCH and ECM-GARCH models considering the heteroscedasticity has better effect, which can achieve the better effect of hedging risk out of the sample.