The Spillover Effects Between A-share Spot Lndex Market And Index Future Market

With the development of Chinese Capital market, different kind of equity instruments are emerging now. From the only spot Index market at very begining, we now have not only spot Index markets but Index future market. Though Chinese domestic capital market has a lot to do to be grown up, every milestone bears witness to every step towards maturity.This paper did a thorough analysis of spillover effects between CSI300, one of the most representative spot Index in Chinese A-share market, and the only two Index futures markets that based on A-share market——IF Index future created by CFFEX and FTSE China A50Index future listed in SGX.First, we sort out related papers and conclusions about spillover effects between spot Index markets and Index future markets from both foreign and domestic district, and find that in most developed countries, Index future markets dominate spot Index markets and mostly have excellent price discovery capacity. As for volatility spillover, different researches have not yet reached an accepted conclusion.Then, we clarified the definition of spillover effects and demonstrate theories related to it. We believed there are generalized spillover and that in a narrow sense.This paper focused on narrow one and beleived that it is derived from micromarket mechanism. So, we put a lot strength on demonstration of market mechanism, characteristics and functions.Finally, in empirical analysis, we adopted high frequency data of both three markets. Based on vector error correction model, price discovery capacity measurement and realized volatility, we reached the conclusion that:IF Index future market dominate other two markets in price discovery process, but asymmetric patterns were found; Price discovery capacity of A50Index future market is lowest, and spot Index market dominate A50Index future market; Volatility from IF Index future market can transfer to other two markets, but conclusion has a slight difference when it comes to jumps in volatility; Relative trading volume, total volatility and relative volatility affects price discovery capacity in both IF&A50Index future markets.