Study On Volatility Spillover Between Chinese Stock Index Future Market And Spot Market

With the world’s major capital markets are recovering rapidly, Chinese capital has been depressing and the stock index always wander near the historic lows and can not advance. Therefore, it is meaningful to research the relationship between the stock index futures market and the stock market, verify the risk transmission mechanism and use stock index futures to stabilize the stock market. There are already four year since the CSI300stock index future was first released at China Financial Futures Exchange. During the four years, the CSI300Stock Future developed quickly and stably, and had become one of the most influential financial derivatives at Chinese capital market.Based on the background above, this paper learn from the results of previous research and combine the theoretical analysis and empirical analysis to research the volatility spillover between the CSI300index future and the CSI300index. Firstly, we use the15‐minutes interval frequency data of the CSI300consecutive contract and CSI300index to estimate the Realized Volatility of the two markets. Then we analyze the descriptive statistical characteristics of the realized volatility. Lastly, we base on the the Realized Volatility to build the bivariate BEEK‐GARCH(1,1) model, researching volatility spillover between the two markets. The empirical results show that: the distribution of the Realized Volatility of the two market has tall kurtosis, heavy tail and extreme right skewness. Compared with the spot market, the future market has bigger standard deviation and smaller kurtosis and Skewness. The pre‐conditional variance of spot market impact the volatility of futures market, and the pre‐conditions variance of the futures market also has an impact on the current is pot market volatility, there are two‐way volatility spillover effects between the two market. From the degree of volatility spillover, the volatility spillover from futures market to spot market is significantly higher than the volatility spillover from spot market to futures market. Increasing the flexibility of futures market volatility, in the short term, will exacerbate the spot market volatility, but in the long run will reduce spot market volatility.CSI300index futures has price discovery function to certain extentLastly, we probe the reason why the stock index future market play a leading role in information transmission mechanism from the characteristics of transaction of stock index future. Then we propose policy recommendations to improve the stock index futures market.