China's Stock Index Futures On The Spot Swings And Study On The Relationship Between The Conduction

Stock index future has two basic economic functions:risk transferring and price detecting. Since October16th,2010, Hushen300stock index future contract has been listed in Future Exchange. The essay tries to answer the following two questions:1.whether the stock index future can smooth the fluctuation of stock market2. How the future and current market react to each other. The findings can enhance institutional investors’confidence in hedge risk by future contract and give a good example for the ongoing listing of China T-bill future contract.This essay can be divided into5sections. Section1is introduction. Section2articulates the main theories. Section3addresses the empirical test of the change in volatility of China stock market. Section4presents the empirical test of the interaction between the stock future and current market. Section5concludes the essay and offer some suggestions for the policymakers.The essay has following findings:1. Stock index future largely smooths the fluctuation of the current stock market.2. There exists Granger causality between stock i ndex future prices and current prices.3. Future market responses m ore quickly to th e m arket in formation th an c urrent market.4. It t akes1ess t han15m inutes f or b oth m arkets tor eceive t he n ew p rice information.5. Stock index future has a relatively weaker impact on the current market.