Research On The Impact Of The Investor Sentiments On The Volatility Spillover Effects Between Stock Index Futures And Spot Market

Since the CSI 300 stock index futures contracts traded, it has received extensive attention from the industry and academia. On the one hand, as the risk management tools, the functions of the stock index futures are to reduce the spot market volatility and to avoid risk. On the other hand, the launch of stock index futures will attract a large number of speculators. In this way, stock spot marker volatility will intensify. Therefore, in order to further develop and consummate stock index futures market, the reserch on the relationship between stock market and stock index futures market in China is particularly urgent and important. In previous studies, the domestic scholars did not combine behavioral finance to study the volatility spillovers effects between the stock index futures market and the spot market. Based on investor sentiment, exploring the volatility spillover effect between stock index futures market and sp ot market has both theoretical and practical significance.Based on the predecessors’ research, we select five objective indicators to forn investor sentiment index. They are the market turnover rate, p/e ratio, price-to-book ratio, advance-decline line and buy-sell-imbalance. We use principal component analysis to construct investor sentiment index(ISI). According to the theory of generalized variance decomposition spillover index, we get two-way dynamic volatility spillover index of the stock index futures market and the spot market using the generalized forecast error variance decomposition and fixed window rolling samples estimate. We then use VAR model, granger causality test, impulse response analysis to examine the impact of investor sentiments on the volatility spillover effects between stock index futures and spot marker. Besides,We study the impact of the investor sentiments on the volatility spillover effects between stock index futures and spot market based on the bull market and bear marker. We found that: there exists asymmetry between the volatility spillover of stock index futures to the spot market and the volatility spillover of spot market to the futures market. Investor sentiment index and the spot market volatility spillover effects are significantly negative. Investor sentiment index and futures market volatility spillover effects are also significantly negative. Furthermore, the degree of the impact of investors’ sentiments is asymmetry between the volatility spillover of stock futures to the spot market and the volatility spillover of spot market to the futures market...