Empirical Study On Price Discovery Relationship Of CSI300Stock Index Future Market And The Spot Market

Financial derivatives and their underlying assets share commonimplicit efficient information; price discovery is an incorporationprocess of new information. This article briefly disscusses the pricediscovery function of Shanghai and Shenzhen300stock index futures,adopting qualitative research and empirical study both, with indexfutures and index itself compared. Firstly, this article describes the micromarket structure of A-shares market and index futures market, andmakes qualitative research on the discovery of index futures and spotmarket with the theory of the investor structure hypothesis, transactioncost hypothesis, and limited trading hypothesis. Also, this article choosesone-min high frequency data of Shanghai and Shenzhen300stock indexand its futures to do empirical studies on A-shares market and futuresmarket, of their lead-lag relationship and particular innovationcontribution, also mentioned as leading and dominant function, usingVAR model and I-S model. Besides, to study volatility spillover effectwith Double variables VEC-EGARCH (1,1)~t model between thesetwo markets.The study reveals that both theoretical and empirical angle confiedstronger price discovery ability of index futures markt. Compared withA-shares market, index futures market can absorb more information, proved to be more price discovery efficient. VAR model reveals thatthere is price-leading relationship of futures market and A-shares market,and futures market is8min earlier than A-shares market; meanwhile, theInformation Share model suggests that the preponderance of the pricediscovery takes place at futures market (a median64.06percentinformation share). Compared with A-shares market, futures market isable to incorporate more innovations and is more efficient in pricediscovery. Through the study of volatility spillover effect model, there isone-side volatility spillover from futures market to A-shares market, andprevious volatility of futures market will obviously weaken the volatilityof spot market at current period, futures market is more sensitive to nonequilibrium state than A-shares market.So, futures market can provide important reference for relativeestimation of asset price fluctuations in short period. The arise ofderivatives, especially the ones which based on representative index, isbeneficial to the improvement of financial system and the exploration ofhedging strategy.