A Study Of The Effect Of China’s Stock Index Futures On Spot Market Volatility

Stock index futures in the development of China can be full of twists and turns.In the beginning,the introduction of index futures trading in2006set up a goodearly stage of development, but violations frequently occured because the regulatorysystem was imperfect, investors gradually gave up the stock index futures returningto stock market, and later with the regulatory policy, trade rules gradually improved,until April16,2010stock index futures was officially launched, a huge tradingvolume after the launch, at its launch four years close to five years, financial marketschanged dramatically over the years with the occurrence of the rapidly economicdevelopment. Because of stock index futures, people’s investment methods haveincreased, making people get benefits to become more various, better able to achieveefficient allocation of assets, thus giving investors more wealth.The introduction of stock index futures is a great financial innovation, and alandmark event in the history of financial development, portfolio investors increasedthe diversity of investment. Stock index futures can also avoid risks, hedging andother functions, as a new type of financial innovations, the impact of stock indexfutures on the spot market is also widespread concern by investors, many scholarshave studied the impact of stock index futures on the spot market. China as anemerging stock index futures market, drawing a lot of experience from developedcountries, to deal with the risk of stock index futures more cautiously, the impact ofstock index futures on the spot market can not be underestimated, the study of stockindex futures impact on the Chinese stock market is significant.There is theoretical and empirical analysis of stock index futures on the spot market in this paper. This paper reviews the development history of the world stockindex futures, then theoretically analyzed the function of stock index futures, stockindex futures trading data provided the basis for further research. In this paperempirical analysis used a variety of methods. In April16,2010as the cut-off point,the time is divided into two periods, the early period before of introduction of stockindex futures and the later period after of stock index futures turning up, usingclassical GARCH model to study the stock market volatility before and after theintroduction of stock index futures, and then used GARCH model with dummyvariables for further study of the stock index futures is increasing or decreasing thevolatility of the spot market, then demonstrated short and long term impact on thestock market, the launch of stock index futures investors in the short term if there isspeculation on the spot market volatility, fluctuations in the long run is if returned toreason, the final study was asymmetric impact, using EGARCH model. Theoreticalanalysis and a variety of empirical analysis about the Chinese market, the impact ofstock index futures on stock market volatility, and thus make specific and detailedproposals, I wanted to help investors diversify investments and government’sregulation on stock index futures market provide useful suggestions.