The Research On The Hedging Effectiveness Of China’s Open-End Funds Using Stock Index Futures

The Europe break out sovereign debt crisis in2011.The stock market repeatedly frustrated. But the stock index futures and other derivatives not only did not shrink, but the trading volume hit a record high.It reflected a sharp increase in market hedging demand under the context of the financial turmoil.The stock index futures play a positive role in resolving the market risk.CSI300index future has been introduced for two years by April2012.Its hedging transactions wheather can play a useful role and how to better play its role in China’s open-end fund investment management is an issue worthy of study.In this context, the third part of this paper analyse the significance of lauching the CSI300index future to China’s open-end fund. The third part also described the operation status of CSI300index futures, that explain our country already have a good market foundation.Based on the hedging theory in second part, the fourth part uses CSI300index futures transaction data for an empirical analysis. In the empirical analysis we use static hedging model and dynamic hedging model to estimate the optimal hedge ratio and compare the hedging effectiveness. We also compare the hedging effectiveness in different sample or different terms and at last find out that using CSI300index futures to hedge on China’s open-end fund can avoid most systemic risk. We also find that hedging effectiveness of the different models is not very different. Dynamic hedging strategy is not necessarily better than the static hedging strategy.The fifth and sixth part analyse the risk and operation obstacles during using CSI300index futures to hedge China’s open-end fund.Then we learn from the experience of U.S. mutual fund using stock index futures.On one hand, this paper provides a reference for open-end fund managers.On the other hand, this paper provides recommendations for improving China’s stock index futures hedging mechanism.