| After many years of preparation, China Financial Futures Exchange (CFFE) officially introduced the futures trading of CSI300Index, which symbolizes the great achievement of China Financial Market Development and will as a result promote the healthy development of the China Capital Market in the future.Nevertheless, the rapid growth of the future trading of CSI300Index afterwards has attracted the attention of the market supervisors and investors, raising questions such as the actual influence of the introduction and trading of the stock index future towards stock market fluctuation and the co-movement relation between the stock market and the index future market (mainly from the effect of the mean spillover and the volatility spillover). Using the real data of stock index future, through empirical models based on single-variate GARCH, VEC and multi-variate GARCH models, we will answer those questions above as well as others relevant in this essay.According to the research, the introduction of stock index future has improved the operation quality of spot market by a certain extent. To elaborate, several major functions are shown as below:1. The volatility in the spot markets dropped by a significant amount statistically, yet not as much in economical senses. The introduction has pushed the information transmission to be much faster and enhance the efficiency of it, meaning the new information can reach the price sector much faster and therefore reduce the effect coming from the existing one. 2. After studying the effect from spot trading volume and the positions of the future trading, we find that volatility of the spot market decreased after the introduction, the percentage of the information from the fluctuation increased and the market depth grew by a great amount, which indicates that the market has been given a greater ability when facing intense fluctuation so as to stay stable.3. There exists co-integration relation between stock index future market and stock market. A two-way information transmission between the two markets allows an amendment to the long-term non-equilibrium and the price discovery function to play properly, at the same time, proving significant and symmetrical fluctuated spillovers between stock index spot and stock index futures.4. The returns of stock index future and stock market are not strictly related in a positive way, showing significant differences in the short run. Fluctuated spillover effects are also seen here with an asymmetrical and lasting trait. Those effects are the valid proof of the information transmission from index future market into spot market. |
PDF Full Text Request