Spectral Analysis Of The Interaction Cycle Between Stock Index Futures Market And Stock Market

Stock index futures have now become one of the fastest growing financial derivatives, since it had been introduced less than30years ago. And especially in emerging markets, Stock index futures have prominent development. With the rapid development of the global stock index futures market and the gradual improvement of China’s capital market, China Financial Futures Exchange launched the C SI300index futures on April16,2010.Since the introduction of stock index futures, so many scholars have do research on them. Much of the research is concentrated in mature markets such as Europe and the United States. Research is divided into two directions. One is whether the introduction of stock index futures will cause fluctuations in the spot market. Another is the price discovery role that stock index futures play. GARCH models were used in most previous studies, but another method, spectra analysis which is commonly used in cycle analysis, is used in this paper, to find out the volatility cycle between stock index futures market and spot market. Depending on the current market circumstances and daily date, there is no significant evidence to prove out the price discovery role of stock index futures.And the fluctuation cycles between the two markets are roughly the same. Both cycles fluctuate frequently and shortly.There are six parts in this paper. The first chapter is introduction. The second chapter introduces the review of the literature on stock index futures and stock market. The third chapter is the outline of the CSI300stock index futures. The fourth chapter focuses on the volatility cycle of daily return between CSI300index futures market and spot market. In fifth chapter, spectral analysis is used to find out the exact cycle between the two markets. In Chapter six, the final conclusions are reached, and policy recommendations are advised depending on the conclusions.