Empirical Research On The CSI300 Index Futures Hedge Ratio

In recent years,the global financial markets are constantly experiencing a variety of significant events,many events has made investors have to face significant systematic risk,such as the financial crisis which began in the US in 2007,the European debt crisis which happened in 2010 and the intense volatility of domestic stock market.According to Markowitz's portfolio theory,in the stock market,non-systematic risk can be spread through the construction of the portfolio,but this approach cannot avoid the systematic risk of the market.Therefore,with the continuous innovation and development of financial markets,futures,options and other financial derivatives have been introduced.Futures,to be an important financial derivative,are supposed to help investors avoid the risk of price fluctuations facing in the spot market,which is the futures' basic function.In the stock market,through the portfolio construction of the opposite direction of the spot and futures,investors can achieve the purpose of avoiding systematic risk,This function is called hedging,which is the most important function of futures.In 2010,the first Chinese stock index futures are launched,which is called CSI300 Index Futures.In order to enrich their investment strategies,more and more investors bring index futures into their portfolio.While using stock index futures to hedge,a significant problem should be considered is that how many units of stock index futures should be used to hedge one unit of spot.Therefore,the optimal hedging ratio of futures is also a core issue for domestic and foreign scholars to study in recent years.This paper studied the estimation of hedging ratio of CSI300 in depth on this background.Instead of using a single model to carry out the study of estimation,several models are compared in this paper.After considering the characteristics of fluctuation agglomeration,asymmetry,long memory and structural change in futures and spot market,this paper established seven models,including OLS model,VECM-GARCH model,VECM-EGARCH model,VECM-FIGARCH model,VECM-FIEGARCH model,MS model and MS-VECM model.In this paper,we estimate the optimal hedging ratio by the seven models.And then the results of the hedging of the seven optimal hedging ratios were evaluated based on the principle of risk minimization with the tests of in-sample and out-of-sample.While conducting in-sample test,the research has shown that the optimal hedging ratio which are estimated by the seven models for portfolio risk reduction contribution from high to low was: OLS model,MS-VECM model,MS model,VECM-EGARCH model,VECM-FIGARCH model,VECM-GARCH model and VECM-FIEGARCH model.Moreover,the effect of the seven optimal hedging ratios is stronger than the full hedging strategy which use one unit futures hedge one unit spot.While conducting out-of-sample test,however,the research has shown that the optimal hedging ratio which are estimated by the seven models for portfolio risk reduction contribution from high to low was: MS-VECM model,MS model,VECM-EGARCH model,VECM-FIGARCH model,VECM-GARCH model,VECM-FIEGARCH model and OLS model.The estimation result of MS-VECM model is 0.894427 which reduces the portfolio risk by 0.840670.Thus,in the more persuasive evaluation of the out-of-range data range,the optimal hedging ratio estimated by the OLS model that currently widely used by investors cannot provide the best results.Therefore,investors should continue to update and improve the estimated model based on the reality,so as to achieve the best hedging effect.Due to the late launch of China's stock index futures,there are a few of sample to be studied.Although a large number of scholars have studied this issue,the effectiveness of the results of the study is very limited.Therefore,this paper expanded the sample range to the end of 2016,the period of stock index futures were restricted in 2015 is also included,so that the results can be more accurate.In addition,this essay fully considered features of the futures market and the spot market such as long memory,structural changes and many other features,which also laid a good foundation for the further study of the futures market in the future.