An Empirical Study On The Linkage Mechanism Between Stock Index And Index Futures

It has been three years since the introduction of HS300 stock index futures in China.There is a controversy all along the academia that will stock index futures be able to exert its function of price discovery and what effects will be brought out by the introduction of stock index futures to the spot market volatility risk.Based on market microstructure theory and information economics,in order to get more full and true conclusion,the study tries to find out the influence of the launch of stock index futures to the spot market from two main parts:one is stock index futures price discovery function;the other is the effects of the introduction of stock index futures to the spot market volatility risk.In view of the stock index futures price discovery function,this paper selects the daily closing data of the futures continuously contract during the month and HS300 index to do the Grange causality test, cointegration and error correction model empirical analysis,revealing the information conduction mechanism and the price discovery process between Chinese stock index futures and spot market.The empirical results show that China stock index futures prices ahead of the spot market prices on the price discovery ability,there is a one-way relationship between the stock index futures market and the spot market for a long time.Using GARCH models and empirical methods, such as value at risk (VaR), to explore the risk conduction characteristics between futures and spot market,this essay also: analyses the spot market volatility changes after introducing the stock index futures,comparing with before.Analysis shows that,among the three kinds of distribution hypothesis on the spot market yields before and after the stock index futures introduced,the failure rate of estimates based on GED distribution is most close to the corresponding significance level,therefore, the estimation accuracy is the highest.The results can also pass the test even at the higher confidence level.This means the estimation result based on GED distribution can better depict the tail risk characteristics of HS300 index yield distribution.Meanwhile,regardless of the confidence level,the average value of VaR statistics before introducing stock index futures were significantly lower than before.It shows that overall risk of HS300 index spot market has declined after introducing stock index futures.Finally,using the experience of predecessors’ a lot of empirical and conclusions,the paper gives a reasonable explanation from the perspective of economics and the feasibility of standardize the development of the stock index futures in China.