The Empirical Study On How Hushen300Stock Index Futures Affects Hushen300Index’s Price And Volatility

Stock index futures,a special kind of futures,is a vital financial derivative.Itplays an important role in stability of the stock market,risk aversion and discoveryof price.In1993,Stock index futures newly emerged in China, but crumbled a fewmonths later for various reasons. After4years ‘simulations, Hushen300stockindex futures officially work on China again in16th,Apr,2010. It is a popular beliefby economists that Hushen300stock index futures does make sense to volatility ofthe whole stock market and to trend of market price. However, I wonder if theevaluated phenomenon is the same as the fact that Hushen300stock index futuresactually works, which has came out from imperfect market circumstances. In thispaper, I will analyze diverse empirical cases on the basis of reality of China andgeneralize how Hushen300stock index futures affects Hushen300index price intwo main parts——price leading function and volatility.The samples of futures and basic cash flows in later part of the year, whenstock index futures make effect on the market, are chosen as the objects of priceleading function parts.With the help of ECM model, I draw a conclusion that theprice of futures and the prices of cash commodity react on each other and the latterhas stronger reaction.In investigation of volatility, I aim at the market closing price in recent threeyears and divide this three years in two researching periods——early-term,latter-term with EGRACH model. Samples show that stock index futurescontributes to reduction of market’s volatility so that the stock market becomemore stable.Above all, serval political advises are given according to mentionedsumming-up, and I hope these advises could make contribution to stock market’sflourishing.