CSI 300 Stock Index Futures Hedge Ratio Based On Shenzhen 100ETF

ETF as an index of investment instruments, investors who bought the ETF are equivalent to buying a basket of stocks, so the ETF is an investment tool that many risk-averse investors like, because it helps investors effectively avoid systemic risk but this passive management make ETF fall together with the stock market in the face of systemic risk. Coupled with China’s stock market started late, various systems are not perfect, systemic risk is significantly higher than developed countries’, so China ETF investor urgent need for a new financial instruments. After years of preparation, the first stock index futures contract of china officially launched the transaction on April16,2010, which ends our20years of unilateral market structure, opens up new prospects for the development of China’s stock market. Since then, ETF investors have a financial instrument to avoid systemic risk, then how to use index futures to hedge the ETF is particularly important.Firstly, from a theoretical description, the paper introduces the necessity and feasibility of ETF hedge. Then in empirical research stage, it selects Shenzheng100ETF that tracking error is small and the yield is high to research. In order to illustrate the necessity of Shenzheng100ETF hedging and the feasibility of using CSI300stock index futures hedging, it calculates systemic risk by CAPM and analyzes the correlation between Shenzheng100ETF and CSI300stock index futures. Subsequently, it uses OLS model, B-VAR model, ECM model, GARCH model and ECM-GARCH model to study the CSI300index futures on the Shenzheng100ETF optimal hedge ratio. The results shows that the optimal hedge ratios of these models are not very different, but the maximum is GARCH model, the smallest is OLS model, which shows that OLS model can help investors save hedging cost. To measure the effect of different hedging models, it introduces the Ederington measure method. After calculation, the effect of hedging of OLS model is best, following with B-VAR model and ECM model, the effect of hedging of GARCH is worst. But from the Portfolio investment income after hedging, the ECM-GARCH model could help investors get maximum gain. From the degree of risk reduction, the use of GARCH models could reduce the sharpest risk. From income-risk ratio, the ECM-GARCH model has the maximum income-risk rate, which bears the risk of a unit gain could get maximum income. From the absolutely coefficient, the highest is the ECM model. Therefore, investors should select the hedging models based on their characteristics and circumstances faced.