The Empirical Study On The Optimized Hedge Ratio Of CSI300Index Futures

Securities price fluctuation risk includes systematic risk and unsystematic risk. Unsystematic risk can be eliminated through fully decentralized investment; sys-tematic risk can be eliminated through the hedging of function of futures index. Hedging is the most important function of futures markets. Efficiency of Hedging relies on the hedge ratios, so estimate of hedge ratios is core of research of the hedging theory.There is three years since the CSI300index futures is provided in April16,2010. It is concerned with the management of risk. More and more scholars are beginning to research hedge ratios; however the research productions are far dif-ference from the West. Comparatively speaking, there is extended room in re-search of the hedging theory in china futures index market. This article examines hedging in china stock index futures market to find a best econometric technique to estimate hedge ratios.This article examines hedging in china stock index futures market. The hedge ratios are estimated by four econometric techniques:the standard OLS regression, Threshold VECM as well as time-varying CCC-GARCH and Diag-BEKK GARCH models. The hedge ratio is0.855360estimated by the standard OLS re-gression. The hedge ratios are0.929197å'Œ0.981898estimated by Threshold VECM. The average hedge ratios are0.879594å'Œ0.879891estimated by time-varying CCC-GARCH and Diag-BEKK GARCH models. The empirical re-sults show that the Diag-BEKK-GARCH model provides best hedging ratios, while Threshold VECM is superior to OLS.There are two econometric techniques to evaluate the empirical results. Ede-rington(1979)consider that futures index and cash index can be regarded as a asset portfolio, so the improvement of reduce of securities price fluctuation can be a in-dex to evaluate the empirical results. The empirical results show that the Di- ag-BEKK-GARCH model provides best hedging ratios, while Threshold VECM is superior to OLS. the improvement of reduce price fluctuation is14.07%by Di-ag-BEKK-GARCH model.VaR(Value at Risk) refers to a financial instrument or an asset portfolio en-dure the maximal lost when the securities price fluctuating in confidence interval, the empirical results show that the Diag-BEKK-GARCH model provides best hedging ratios, while Threshold VECM is superior to OLS and CCC-GARCH model. the improvement of reduce price fluctuation is15.37%by Diag-BEKK-GARCH model.The possible innovations in the paper are as follows:First, there are four econometric techniques:the standard OLS regression, Threshold VECM as well as time-varying CCC-GARCH and Diag-BEKK GARCH models. The empirical results show that the Diag-BEKK-GARCH model provides best hedging ratios.Second, Threshold VECM is used to estimate the hedging ratio, this econo-metric technique is between of OLS and time-varying CCC-GARCH and Di-ag-BEKK GARCH models.Third, in data selection, the interval time of the return ratios of stock index futures and stock index spot is30minutes, so we can get a great number of data for the article. Farther more, the hedging ratios is more real-time, so the best hedging ratios can be selected.