The Research On The Impact Of Stock Index Futures On Stock Market Volatility

Stock index futures is the youngest, most active member in the family of financial futures. Since the stock index futures report of Kansas City Board of Trade(KCBT) passed in February 1982,Stock index futures attracted more and more investors’attention, transaction scale has expanded rapidly and the trade category has increased. The HS300 stock index futures is our country’s first kind of stock index futures contract. It’s launch signified our capital market stepped out a solid pace toward a more mature system, and ended the history of unilateral operation, lacking of hedging tools in our stock market. With the initial launch of IC500 and IH50 stock index futures, it’s important to systematically exam the impact of HS300 stock index futures on our stock market’s volatility, evaluate the ability of HS300 stock index futures to keep spot market stable. That plays an important role in perfecting current operation mechanism and deepening our capital market reform.Risk and volatility, as the two major characteristics of financial market, has been researched many times by domestic and overseas scholars, especially on volatility of stock market caused by stock index futures. Some thinks stock index futures has deepened the depth of stock spot market, improved the efficiency of price discovery, reduced the volatility of stock market. Another insists stock index futures has enhanced the volatility since its’highly leveraged features, especially during the stock market crash in October 1987.The abnormal fluctuation of stock market in our country occurred in June 2015,also caused many criticism on stock index futures.This paper research HS300 stock index futures’impact on spot market during both steady operating market and abnormal operating market by adopting the combination of theory and empirical methods. Firstly, this paper take use of theoretical methods to analyse the impact of the futures market to spot market volatility, reviewing the development of foreign stock index futures market and functions, making an qualitative analysis of the influence of stock index futures on the stock market volatility. Secondly, based on the futures market and spot market transaction data, take the daily closing price from April 17,2006 to April 16,2014 as the research object, and process a first order differential to obtain the HS300 stock index futures’daily yield sequence, using GARCH model exam the impact of HS300 stock index futures on stock market volatility empirically. In addition, through the analysis of the market transaction data from 2015.5 to 2015.9,analyze the function of HS300 stock index futures during abnormal operating market. Finally, choose futures price sequence and index price sequence from 2015.1 to 2015.12,establish a VEC model to test the relationship between spot market price and futures market price during the crash of stock market.In this paper, the study find that the introduction of HS300 stock index futures will reduce the volatility of the spot market, but the reduction is not remarkable. During the crash of stock market, HS300 stock index futures played an important role in risk hedging, and it’s not an inducing factor in stock crash. In addition, the spot market price induced changes of futures market price, accounting for the imperfect transaction mechanism of HS300 stock index futures.