An Empirical Study Of The Effect Of Stock Indexfutures Hedging

As the only two financial futures stock index futures enriches the types of financialproduct. It has played an important role in promoting the financial market innovating and thehealthy development of the capital market. Stock index futures are similar to ordinarycommodity futures. It is introduced in order to suit the needs of people at risk. Its investmentassets are the basis of the stock index. The only stock index futures in our country’s marketunderlie the CSI300index. Since the launch of the CSI300stock index futures, the pattern ofthe capital market was changed, investors can short the stock market by investing in stockindex futures.The primary purpose of stock index futures is to avoid risks. Therefore hedging becomesthe primary function. The basic idea of hedging strategies are: if investors holds a portfolio ofstocks, they face the risk of the price of the asset will fall, at this time they can choose thestock index futures,sell a stock futures contracts which is similar to the portfolio of stocks,they will be the bear of the future market. By this way they can avoid risks. If investorsforecast the price of portfolio will rise, they can buy some futures contracts, if the price roseas expected, the profit of futures market can compensate for the loss of the spot market. Themost important problem of hedging is determing the optimal hedge ratio. That is investorsneed how many futures contracts to hedge the risks of the spot market. Modern research ofthe optimal hedging ratio mainly in two directions: one is based on minimizing risks; anotheris based on maximizing utility. In this paper the research direction is the purpose ofminimizing risks. Using OLS model、VAR model、VECM model、GARCH model to estimatethe optimal hedging ratio, then according the optimal hedge ratio analysis the performance ofhedging. In order to compare with international developed capital market, writer choosesHong Kong’s Hang Seng Index and Hang Seng Index futures which contact with domesticcapital market.Through qualitative research, writer found that, the value of hedging performance areabove0.9. It suggests that investors can avoid the risk of more than90%. Through model analysis and comparison, it is not suitable for our market. Investors must choose the mostsuitable model to decide the optimal hedge ratio. But compared with the Hong Kong market,hedging performance is relatively low. So our capital market has a lot to be perfect.