| Volatility is a measure of the degree how the transaction price of financial assets is deviation from the value. Volatility is the comprehensive reflection of the market in all kinds of information flows, the structure of the trading system and the changes of investors’sentiment. More important, volatility reflects the uncertainty of the market prices and the size of the market risk. In general, the smaller the volatility is, the higher the efficiency of the market operation, and the smaller the market risk. So every country or region of the world is attaching great importance to the impact of new financial products on the spot market volatility.One of the main functions of Stock index futures is to provide a hedging tool for the investors in the spot market. If they exacerbate the volatility of the spot market significantly, they would undoubtedly increase the risk of spot market, which is against the original intention of why the stock index futures are launched. Since February24in1982, Kansas Futures Exchange firstly introduced the Value Line index futures contracts, Stock index futures have received by the market quickly, and thus lead to the rapid emergence of the global stock index futures. It is generally believed that the stock index futures are useful to avoid systemic risks in the spot market and promote the development of the spot market healthily. However, since the stock market crash in the U.S and global stock markets in October1987, the trust in the stock index futures almost instantaneously gone,"whether stock index futures lead the stock market crash" has become a hot topic in recent years. At April16,2010, stock index futures launched in China stock market officially, deeply research on its function of stabilization is more important both in theory and in practice.Under this grand, starting from the HS300stock index futures, the article which is based on modern financial theory and doctrine, and the method of combining qualitative analysis and mathematical analysis, describes the relationship between stock index futures and the underlying spot volatility in depth. This paper selects the January4,2007to December30,2011as the sample space, and establishes GARCH model to compare and analyze the spot market volatility before and after the introduction of stock index future, and then uses the asymmetric TARCH model to verify the results. The estimation of GARCH model in this article includes the following steps:The first step, we examine the stationarity of the return series of HS300index by utilizing the ADF test, this is the prerequisite for the use of regression analysis.The second step, we verify whether futures’trading itself has an impact on the stock market volatility from the statistical significance by using Granger causality test.The third step, we test whether the residual series have the ARCH effect. If they do, we can use GARCH model.The fourth step, we use the GARCH model to estimate equations. Under the conditions of the AIC criterion and the Schwarz criterion, we can choose appropriate GARCH model, then take the ARCH-LM test for the residual series to determine whether the information in the residuals is clean and the GARCH model fits the daily return series of HS300stock index adequately. Of course, the coefficients in GARCH model need to meet the constraints of the model.The fifth step, the TARCH model estimation. If the coefficients in TARCH model are not remarkable, the reaction of conditional variance to good news and bad news is symmetrical, that means the stock market does not exist leverage effect. If they are remarkable, the leverage effect exists.Based on the above research, the main conclusions of this paper are the followings:First, after the launch of the HS300stock index futures, the overall level of market volatility has decreased. HS300stock index futures effectively reduce the systemic risk in Chinese stock market, indicating that the stock index futures can really play an active role of stabilizing the stock market and avoiding systemic risk in the stock market.Second, after the launch of the HS300stock index futures, the volatility of HS300stock index has not change significantly. This conclusion is consistent with the mainstream thinking of foreign scholars, because the stock index futures market in China is still a small niche market, its impact on the stock market is relatively limited.Third, after the launch of the HS300stock index futures, the transmission speed of information slows down. This conclusion is contrary to the results of researches obtained in mature markets. The main reasons conclude:1. The HS300stock index futures have just lunched and the futures market is in its infancy, so the expected function has not yet been fully released.2. The structure of customers in Chinese futures market is relatively simple, individual investors take the dominant position. Compared with institutional investors, individual investors are often at a disadvantage position when they collect the market information.3. Individual investors easily lead to overreact. They have already made the investment decision before they digested the information completely, or even before the news was unconfirmed, especially bad news occurs. Individual investors are more difficult to get reliable information from the futures market.Fourth, after the launch of the HS300stock index futures, the situation of asymmetric information in the Chinese stock market has improved, the main reason is that the bad news has weakened the impact of market volatility.Fifth, HS300index is compiled by300shares which are selected from the Shanghai and Shenzhen stock market in accordance with the liquidity and market value. If investors use the HS300stock index futures for hedging and arbitrage, it will inevitably increase the demand for constituent stocks, which would highlight the importance of the constituent stocks.The main innovations are as follows:First, the transaction of stock index futures is just launched, from the current results, the number of the research about the impact of the HS300stock index futures on the spot market volatility is still relatively small, which makes this paper is more practical significance.Second, this paper uses the G ARCH model to analyze the impact of the HS300stock index futures on China’s stock market volatility. For the GARCH model, we introduced a dummy variable in the conditional variance equation, and set the coefficients of the dummy variable as the proxy parameters of volatility, in order to reflect the degree of changes about market price fluctuation before and after the listing of index futures market. Third, this paper ends with3respects.1. This paper analysis the changes about stock market volatility before and after the HS300stock index futures, and answer the question "whether the stock index futures is the culprit to stock market volatility", which is the most basic research.2. This paper analysis how the transmission speed of information changes before and after the introduction of stock index futures market, which contributes to the research deepened.3. This paper reveals how the "leverage effect" on the stock market varies after the introduction of stock index futures, which makes this paper become a very in-depth study. |
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