Analysis On Hedging Efficiency Of The Stock Index Futures In China

The global financial markets suffered heavy losses, after the U.S. subprime mortgage crisis occurred in2007.Also in China, the stock market dropped from6000to1600and most of the institutions and investors will naturally not escape the bad luck that their assets has shrunk dramatically. The Shanghai A-Stock market fell21.68percent in2011, while it fell14.31percent in2010.So most of the investors will suffer. This systemic risk in the stock market can’t be expected to.Stock index futures is a cash equities for the subject matter of financial derivative products. Comparing with the stock market, it has its own quality such as high leverage, low transaction costs. What’s more it has the function of hedging, resource allocation, price discovery, etc. Investors can effectively reduce the systemic risk faced by, if the stock index futures is properly used. Thus it has play an important role in the capital market.With the developing of Chinese capital markets, the status of the stock market is also increasingly important. In the context of developed countries who basically have their own stock index futures, stock index futures in China has experienced the introduction of a very long time. The introduction of stock index futures also improve the short mechanism on the market. What’s more it can bring us a new investment styles. The most important role of the stock index futures is hedging, so it is necessary to make a analysis of the hedging, especially the hedging efficiency.This article is relying on China’s stock index futures market, in which the hedging ratio and the hedging efficiency is two cores. Through importing data, we found that in China’s stock index futures market hedging is efficient, the idea of the article is organized as follows:The first part describes the development of China’s stock index futures. What’s more, We make a study on the frontier research on the hedging at home and abroad. On one hand, the model of hedging ratio is studied. On the other hand, on the other hand the hedging efficiency models were reviewed.The second part is a core part of the article. The first is the principle of hedging as well as the type. What’s more, basis risk for hedging can’t be ignored. The second is the two core point including hedging ratio and hedging efficiency. The core of the hedging-the hedging rate is necessarily involved. Domestic and foreign scholars study found that, in the hedging process, not the more complex model has higher efficiency, so we want the help of the traditional static hedging rate model (OLS, the B-VAR, the B-ECM) and dynamic GARCH model using the latest data an empirical test, calculate the set of our local market hedge ratio. Relying on the hedging rate, we can know the hedging effectiveness and efficiency. Most of the research were in the past Ederington effects model analysis, In this paper we used not only by Ederington model to test the hedging efficiency in China’s market, but also innovative from the utility maximization point of view the introduction of the HKL model measurements. Under the Ederington model, the OLS model efficiency is the highest. That reveals from one side not the more complex models obtained the better. Under HKL model we found that the result obtained by the GARCH model is the best, which overcome some shortcomings of the traditional model. After testing the effect of the former chapter, a careful analysis of the subjective factors of investors in our market may have an impact on efficiency, including the quality of their own, and strategic choice factors. What’s more objective factors such as risk factors (including liquidity risk, basis risk, etc.) and market factors (in reality the spot to build the combination of difficulties, and the corresponding hedging the imperfections of the supporting facilities, etc.), can have influence on the hedging efficiency.The third part is the former text of summary, and has targeted a number of recomm endations.