The Evaluation And Comparison Study Of The Optimal Hedging Ratios Of The CSI300Stock Index Futures

The hedge function of the stock index futures is not only the initial impetus fordeveloping the stock index futures, but also the hedge is the main market function of theindex futures. Moreover, whether one kind of futures is successful depends on the hedgeeffectiveness of it. So while the CSI300stock index future has been working for almostone year, can it make full use of hedging?So we select five models: OLS、ECM、BGARCH、ECM-GARCH and DBEKK-GARCH to estimate the optimal hedge ratios. Andit compares the hedge effectiveness of different models by means of Ederington and Utilityincrease respectively. Moreover, we study that how the transaction costs incurred duringthe portfolio-rebalancing process and the investors’ risk-aversion coefficients separatelyinfluence the choice of the optimal hedging model through the way of empirical research,supplying some theoretic and practical suggestions for the investors making use of the CSI300stock index future through hedging.Through the evaluation and comparison study of the optimal hedging ratios of the CSI300stock index future, it gets the following conclusions:Firstly, the systematical risk of the spot stock portfolio can be effectively avoided bymaking use of the CSI300stock index future;Secondly, the optimal hedge ratios estimated based on the models in this paper areless than one, which indicates that these models can save the cost of hedging comparedwith the simple hedge model.And the series of the optimal hedge ratios based on thedynamic models are smooth, which all do not obey the normal distribution;morever, if weneglect the co-integration relationship between the spot price and the future price, theoptimal hedge ratios estimated would be higher, so that the hedge effectiveness of modelsare not the best;Thirdly, when we compare the hedging effectiveness of different models by means ofEderington，OLS model is the best model for investors; Whereas we compare it by meansof Utility increase, we make a different conclusion that DBEKK-GARCH is the bestchoice. In a word, when the investors decide to hedge with the stock index futures, theyshould select the proper model to estimate the optimal hedge ratios according to their ownactual conditions;Fourthly, taking the transaction costs into consideration which is incurred during theportfolio-rebalancing process, we find that DBEKK-GARCH is the most popular amonginvestors, because it can make investors gain the maximum utility; besides, we find that investors’ risk-aversion coefficients have a little impact on the choice of the best hedgemodel.