The Influence Of Money Frozen In IPO On Futures Basis

As one of the most successful financial derivatives,stock index futures operated smoothly with considerable volume of turnover since went public.Investors enter the futures market,trade stock index futures mainly due to its following three benefits:The first is hedging,investors in the spot market and futures market can hold cash with opposite directions but equal amount.Usually the loss of one market is offsetted by the profit of another,thus can transfer volatility risk.The second benefit is arbitrage,and the third is speculation.In order to take full advantage of the stock index futures through the three benefits above,we need to pay close attention to the characteristic of the futures basis and make full use of them.Investors can obtain additional risk premium through appropriate trading methods with deep research of the basis and further understanding of the futures market.Therefore,study the factors and characteristics.of the basis and deepen the understanding of it has very important significance for investors.It can also help regulators enact more efficient cross-market regulatory policies and regulations.Based on the Cost of Carry Model,this paper pay more attention on the relationship of money frozen in IPO and futures basis,and we further discussed the influencing mechanism,the result shows that money frozen in IPO can influence the basis through financial liquidity.This paper firstly use the multi-classification dummy variables and OLS estimation,proved that the impact of money frozen in IPO on market money demand and risk free rate is significant.Further analysis we use the ARIMA model,analyzed the influence of money frozen in IPO on futures basis.Through the Granger Test,we found that money frozen in IPO is the one-way Granger reason for basis.Last but not least,after Robust Test and back to the Cost of Carry Model,we concluded that before the 2016 new regulations,the money frozen in IPO can affect futures basis through financial liquidity.