Impact On Stock Index Futures Spot Market

Stock index futures is an important financial derivative product, it is importantcornerstone to improve the financial market system. January8,2010, the StateCouncil agreed to start the stock index futures, which is an important milestone toChina’s capital market. What innovation the stock index futures would bring to thestock markets is not only the answer different financial parties of China want to get,but also the topic the global always researches on and summarises about. Relative tomature foreign markets, the systemic risk of stock market in China is more largebecause of the stock market construction time is shorter, the transaction system is notperfect, the market is not mature enough and the greater volatility of the stock market.As a risk management tool in a family, the Hushen300index futures listed on theShanghai Financial Exchange on April16,2010. The movement of this new productand the stock market has become the focus of the market.The objective of this paper is Hushen300market. This paper studies the impactof stock index futures on the stock market in two ways include the spot marketvolatility after the introduction of stock index futures and Price correlation betweenfuture market and spot market. For the part of volatility, first, establish the GARCHmodel of the full sample, and analyze the impact of the spot market volatility includethe introduction of simulation trading and official trading by the introduction ofdummy variables DF1and DF2. Then, test for causes of fluctuations by establish theGARCH model of subsample. Finally, analyze the impact of asymmetric by establishexpand model include TARCH and EGARCH. For the part of price correlation,smoothness of series should be examined firstly. Secondly, the Granger causality testshould apply to the stationary sequences in order to check the relationship betweenthe futures and spot prices in short-term. Finally take the cointegration test to theseries and build a vector error correction model to examine the relationship betweenthe futures and spot prices in long-term.The main conclusions of this study are:(1) the simulation trading of indexfutures has increased the volatility of the spot market, but the impact is limited, andthe reason is the introduction of Hushen300index futures, rather than the speed ofinformation flow speed up.(2) the official trading of index futures has reduced thevolatility of the spot market, but the effect was not significant.(3) There areshort-term and long-term equilibrium relationship between the future market and thespot market. And the spot market ahead of the futures market in short time, but in thelong-term price discovery process, the futures index is in a dominant position.