Empirical Research On The Impact Of CSI 500 Stock Index Futures On Stock Volatility

The Chinese stock market had experienced "abnormal fluctuations"from June to August in 2015, which was considered to be irritated by the implementation of Stock Price Index Futures (SPIF); meanwhile, the China Financial Futures Exchange (CFFE) implemented a series of measures,including position limit reduction, increasing margin and transaction rate,etc., to limit the interchange of Stock Index Futures. Though the Stock Index Futures provide investors with a risk-hedging tool, its leverage effect and short mechanism can breed the increase of speculation, thus exacerbating market volatility.The soaring and slumping stock market is affected by various factors.On the macroscopic level, the root cause lies in the fact that the investors have a high expectation of the transformation of the corporations and the reform of the state-owned enterprises, which is unmatched by the short-term economic perforrmances; from the microscopic perspective, the direct cause is attributed to the defects in the stock market system, such as the imbalanced long-short mechanism and the unreasonable leverage mode.In order to inspect whether the stock index futures has exacerbated the falling stock prices when the stock market encounters abnormal fluctuations, this paper adopts a panel data policy effect evaluation method based on Cheng Hsiao (2012), and makes an empirical study on the impact of the CSI 500 Stock Index Futures on the stock market volatility. This method overcomes the disadvantage of the classical modes like GARCH and difference-in-difference. First, through observing the changes of AGFI,the non-index stocks corresponding to the stock index futures are selected and the counter-fact volatility path is constructed; then, By means of comparison and contrast between the realized volatility and the predicted volatility, we find that the impact of the Stock Index Futures alteration on the stock price volatility is not dramatic; in addition, the analysis of the margin trading factor demonstrates Stock index futures and margin trading have synergy.This paper approaches the relationship between Stock Index Futures and the stock market volatility quantitatively, and makes a qualitative analysis of the causes resulting in the abnormal stock market volatility.With the conclusion that the Stock Index Futures is not the "culprit" that leading to the soaring and plunging stock market, on the contrary, it can effectively reduce the volatility of the share price when the stock market functions well. Last but not least, this paper puts forward relevant political suggestions, such as consummating the risk hedging tools, optimizing the lever structure, and establishing the public opinion feedback mechanism,etc., so as to provide reference for the development of the Stock Index Futures in China, particularly, under the circumstances of abnormal fluctuation of the stock market, regulatory authorities should be prudent on the Stock Index Futures, avoiding the "stampede" of the spot market.