A Positive Study On Hedging Effectiveness Of China Stock Index Future Contracts

There are two kinds of risk in the stock market—systemic risk and non-systemicrisk. Non-systematic risk can be dispersed through effective portfolio construction.When mitigate the systemic risk, you must use the appropriate hedging tools and thestock index future is a method to be used to distribute the systemic risk in financialderivatives. China’s stock market volatility is more frequent, so there is systemic riskin the market. The CSI300stock index future has been founded by China FinancialFutures Exchange. It was designed to provide circumvention for the securities marketinvestors to stock channels of market risk.The hedging as the causes and basis for the stock index futures market is thebasic functions of the stock index futures. The key to the implementation is thehedging ratio. At present, China’s CSI300stock index futures just launched soon, forthe majority of investors it was a new thing. Therefore, how to determine the hedgeratio to use stock index futures to hedge the majority of investors, not only can helpthe investors to make scientific decisions to reduce the loss, but also can help thegovernment to manage the securities market. It can also contribute to good andhealthy development of China’s stock index futures market.So whether the launching of the CSI300stock index futures can effectively playa hedging role, how it hedges? We should dissolve the above problems. This paper,based on the theory about the hedging and its model of stock index futures, analyzethe effect of CSI300stock index futures hedging in the process of empirical research.Firstly this paper discusses the correlation between CSI300of stock index futures andthe stock index spot. Then established on the basis of least squares regression model(OLS), bipartite vector autoregressive model (B-VAR), generalized autoregressiveconditional heteroskedasticity model (GARCH), based on these models this paperestimated the hedge ratio, and calculated the corresponding hedging efficiency,concluded with a brief analysis of the hedging effect factors. The study concluded thatthere is a long-run equilibrium relationship between the CSI300stock index spot price of the CSI300stock index futures prices, CSI300stock index futures priceguide CSI300stock index spot price to a certain extent, with the price discoveryfunction; different models hedge ratios and hedging efficiency estimates are lesshedge ratio values are concentrated in the0.9near the hedging efficiency valuescentered around0.5; the relevance of the portfolio of stock index futures contracts,hedging preserve and increase the contract with the choice of the hedging period havea certain impact on the stock index futures hedging effect. It can be shown that thelaunch of the CSI300stock index futures indeed played a role to avoid the spotmarket to systemic risk, protect investors, and promote the healthy development ofChina’s securities market is of great significance.