The Research On The Dynamic Adjustment Process Of The CSI300Index Futures Basis

The launch of the CSI300index futures marks that the capital market construction in China took another crucial step, also provides another new market for investors who want to evade the investment risk or pursue the economic interest. For stock index futures investors, it is really helpful to predict the basis when investors are making investment decisions. As the tie between futures market and spot market, basis reflects the deviation degree of futures prices from spot prices, and has very close relations with futures prices and spot prices, so the change of basis has an influence on price discovery, information transition and market supervision. So the research on futures basis has been received much attention. Particularly, the financial futures and other derivatives market in China is still’in its infancy, it is really helpful to study the basis for the system construction, contracts design and so on.In the stock index futures markets, many empirical studies have discussed the persistence of deviations of the futures basis from equilibrium level based on the cost of carry model. From the cost-of-carry model, we can know that spot and futures prices co-move, and their long-term equilibrium is essentially defined by the futures basis, so the model may imply mean reversion in the basis. In particularly, many empirical studies have researched mean reversion of basis from the cost of carry by linear econometric methods. Linear methods may be right, however, only under some certain hypothesis for the basis, that is to say, the adjustment of the basis toward the equilibrium is both continuous and of constant speed, no matter what the size of the deviation from the equilibrium value. It has been proved that there are several factors such as transaction costs and agents heterogeneity that generate no-arbitrage bounds, and they may result that the adjustment of basis toward equilibrium is characterized by the nonlinear, so the nonlinear models may illustrate the dynamical adjustment process of basis very well. This article will illustrate the dynamic adjustment process of the CSI300index futures basis by empirical analysis based on the smooth transition autoregressive model.First of all, this article analyses the nonlinear mean-reverting behavior in the futures basis, then chooses the reasonable model to illustrate it. Secondly, this article describes the relationship between spot and futures prices, and some empirical studies are made on the CSI300index futures by co-integration test, Granger causality test and others, the results are as predicted so that this article can move on, that is to say, the STAR model can be used to illustrate the dynamic adjustment process of the CSI300index futures basis. Thirdly, this article focused on the empirical analysis on the futures basis, it is mainly about the specification, estimation, and evaluation of the STAR model. At last, this article makes some summary and conclusions.Through the analysis and research, this article makes some conclusions:there is a long-term and stable relationship between spot and futures prices of the CSI300index futures, that is to say, the futures market can exert the function of price discovery; the CSI300index futures basis has better stability and less volatile, so the futures market can transfer risks effectively; there is motion for the CSI300index futures basis consistent with nonlinear adjustment process toward equilibrium, and the process can be described by the LSTAR model very well.