The Research Of Price Discovery Of HS300Index Futures And FTSE/Xinhua China A50Index Futures

With the trend of internationalization of financial markets becoming increasinglyevident,particularly developing countries financial system improving,the phenomenonthat the financial derivatives which undelying spot is basically the same in manyfinancial markets to trade become increasingly common.When the financialderivatives trade in financial markets,the coexistence of the competitive situation willbe there.Under the background of internationalization and exchange competition fororder flow,it is particularly important to make sure information disclosure and pricediscovery.On September5,2006, the Singapore Exchange (SGX) began to offer thethe FTSE Xinhua China A50index futures contracts before Chinese domestic market.Then, on April16,2010, China Financial Futures Exchange launched HS300indexunderlying the futures contract. From now on the competition between HS300indexfutures and A50index futures contracts will be appear.This paper examined price discovery process between SGX FTSE Xinhua A50index futures and HS300index futures based on high-frequency data after theinnovation of the Singapore Exchange’s trading system by using lead-lag andinformation share and volatility spillover methodologies.A comparison ofinformation efficiencies between the Singapore Exchange and the China FinancialFutures Exchange is examined for A stock Index Futures listed in both markets.Theresults show a common stochastic trend between index futures and their underlyingindices. There is only a one-way leading function from HS index futures to A50indexfutures price and the I-S model shows that the price discovery function of stock indexfuture is not effective.By analyzing the volatility spillover effect, we find that thereexists only the unilateral information transition from HS300index futures to A50index futures market, and HS300index futures is the primary locus of informedtrading. The results also show price discovery occurs mainly in the home market,which supports the hypothesis of the home country advantage.