Research On The Linkage Between CSI 300 Index Futures And Spot Market

Stock index futures,a tool of market risk management,has been launched in China not long ago.In 2010,CSI 300 stock index futures was officially circulated.Since then,the relationship between stock index futures and spot has stirred a heated discussion in the field of business and economics.Theoretically,stock index futures could transfer the risk of spot market.On June 15th 2015,however,investors are not as positive about stock index futures as before,since the stock market has witnessed a huge volatility and the ability of stock index futures to manage and transfer risk has been questioned again.The shock has deeply hurt Chinese financial derivatives market.Therefore,it is of great importance to recognize the relationship between CSI 300 stock index futures and the spot market and evaluate the function of stock index futures.This paper is based on the sample of all stock index futures before April 2017 and tries to examine the relationship between CSI 300 stock index futures and the spot market.Moreover,sample data are categorized into 5 phrases according to the influence of public policy and impact of stock market change.The fundamental logics is illustrated as follows.First,ECM model is used to capture the long run relationship between stock index futures and spot market and the adjustment speed from shocks to steady state.Then,a VAR model,along with Granger Causality test and impulse response function is adopted to find associations between the return of futures and spots.In addition,GARCH model is built to measure the spillover effect of stock index futures on the spot market and discuss about the interaction between the two markets.As is shown in the empirical result,stock index futures has played a pivotal role in pricing stocks in spot market.Moreover,the volatility spillover effect is quite significant.Meanwhile,government interference tends to have negative impact on stock market and the impact would be much more profound as the interference becomes more intensive.Thus,it could be beneficial to perfect the system,enrich the product,pay attention to education and strengthen supervision so as to build a flourishing stock index futures market.