Under The Hedging Restrictions, The Study Of The Interrelation Between The HS300Index Future And Its Underlying Spot

There has a very closed relationship between shares price index future and itsunderlying index, studying their lead–lag relationship and volatility correlation is verymeaningful. HS300index future is the only index future in the Chinese market, however,the China Financial Futures Exchange require that agent investors are limited to hedgingin the index future market, in this context, this paper makes an empirical analysis on theprice and volatilities relationship between HS300index future and its underlying index.This paper examines the15-minute closing price of HS300index future and HS300indexfrom February4,2013to march25,2013. This paper will take the following steps, firstlyuse the stationary test and the Johansen Cointegration test to find their short and long runrelationship; secondly, build the VAR model and VECM model, and apply Granger test onthe two model to find out the lead-lag relationship; finally, Impulse response and variancedecomposition are applied to discover the volatility correlation of the two.The paper finally comes to the following conclusion: in the long run, HS300indexfutures and HS300index are equalized, and they are each others’ Granger causality.However, in the short run, HS300index future leads the index and the index futureresponse more quickly than the underlying index. Although the volatility and trend aremainly determined by themselves, index future has more influence on index than theunderlying index has.