The Influence Of The China Stock Index Futures On The Spot Market Volatility

Stock index future has become an important financial derivatives with its rapid development since it has been introduced to the market. China launched the stock index future in1993, however one year later it was suspended for its unsound financial system. With these years’efforts on legal system construction and market structure improvement, China finally resumed CSI300Index Futures in April16,2010.With the introduction of stock index future and the interaction between future market and stock trading market, the research on the volatility of these two has becoming a most attractive subject. The volatility means profit and loss for investors however for the regulators, volatility matters not only the policy-making process but also the possible introduction of other financial derivatives in the coming future. Therefore, it is crucial to research on volatility change trend concerning the promotion of stock index future.This paper focused on the volatility research in China’s stock market by empirical analysis, using the data before the launching of stock index future and after the introduction of stock index future. The analysis was tested by GARCH and TARCH models and the result shows that the introduction of stock index future smoothed the trading market instead of aggravating the volatility when bad things happened.Finally, based on the conclusion from this paper, several suggestions and future research ideas have been promoted at the end of this thesis.