Based On The Time-varying Hedging Model Csi 300 Stock Index Futures Hedging Effect Research

As an important financial derivatives, stock index futures can effectively avoid the stock market’s systemic risk. Stock index futures has been launched earlier in foreign countries, and it develops rapidly (especially in America). Using stock index futures to hedge has become the basical strategy to avoid market risk for foreign institutional investors. There is much foreign theoretical and empirical research related to the hedge ratio model. While China still is lack of the more systematic study on stock index futures hedging, for the reason that previous studies are mostly based on the foreign stock index futures data or China CSI300simulation data, which means the representative is not strong. China officially launched the first domestic stock index futures-the Shanghai and Shenzhen300stock index futures on April16,2010, which has filled our gaps in the field of stock index futures, as it provides good financial hedging products for domestic institutional investors. CSI300index, once introduced, immediately was regarded as the ideal target index-based investment by a number of institutional investors. Therefore, Studying on how to fully use the Shanghai and Shenzhen300index futures hedging function, as well as effectively circumvent the spot market price volatility, has important theoretical and practical significance for us.We study the stability and time-varying of China’s stock market beta firstly, and reach the conclusion that China’s stock market beta coefficient has the time-varying characteristics, therefore, when calculate the hedge ratio of stock index futures should use time-varying hedging models in the following study. We then select the Shanghai and Shenzhen300stock index futures data, make use of GARCH, GARCH-M, EGARCH, DCM-GARCH and other time-varying models to calculate the hedge ratios of Shanghai and Shenzhen300stock index futures, and compare the outcomes with the hedge ratio calculated by the OLS model. At last, we make use of Ederington measure model to assess the hedge effectiveness on the hedge ratios calculated by the previews models. The results show that the DCM-GARCH model is the best hedging model, however, hedging effectiveness of other models is not better than OLS.