Investor Structure,Stock Index Futures Trading And Volatility Of Chinese Stock Market

Stock index futures is the financial derivative that could effectively avoid risk and arbitrage,which become the most active financial futures in the international financial market.It influence the economic system and layout in the course of world economic development obviously,which has a double-edged impact on volatility of stock market.It will stabilize the stock market when investors use it for hedging or arbitraging.In turn,when investors use it for speculating to obtain excess risk returns,it will exacerbate the volatility of stock market.The fluctuations of the Chinese stock market are the combined results of different trading behaviors of arbitrage traders,speculative traders and individual investors in the stock index futures trading.The structures and trading behaviors of investors have important influence on the stock market price volatility.The researches,which study the effect of stock index futures on the Chinese stock market volatility,could not only study the real effect state of stock index futures on the financial market stability and remove misunderstanding of stock index futures from all sectors of society,but also distinguish the trading decision behaviors of different investors' structure,satisfy the demand of financial innovation and play the derivative role of stock index futures trading.Firstly,we established a theoretical model to research the effect mechanisms of investor structure and stock index futures trading on the volatility of stock market based on the behavioral characteristics of arbitrage traders,speculative traders and individual investors in Chinese stock market.The following theoretical research results are obtained.When institutional investors have more(less)market shares than individual investors,the volatility of stock market would decrease(increase)with the increase of the institutional investors' market shares.In the presence of stock index futures trading and speculative traders,the volatility of stock market would be negatively related to the ratio of arbitrage traders,and positively related to the ratio and degree of speculative traders.Secondly,we use GARCH cluster models to empirically test the results of the theoretical model by employing the CSI300 spot and futures data and investor structure data during the period from April 16,2010 to Dec 26,2016.Thirdly,we employ the CSI300 index data during the January 7th,2007 to the December 26 th,2016,and use the GARCH model,TGARCH model and EGARCH model,empirically research the effect of stock index futures launching on volatility of Chinese stock market.We get the empirical test results as follows.The proportions of institutional investor and arbitrager have a significantly negative effect on the stock market volatility,and the speculators proportion and speculation have a significantly positive effect on the stock market volatility.The laughing of stock index futures reduces the volatility of Chinese stock market,but the reduce degree is limited.The process of the effect of stock index futures on spot market volatility has asymmetric effect between bad news and good news,which could reduce the volatility of Chinese stock market.The laughing of stock index futures could reduce the asymmetric effect and is benefit to the stability of stock index futures.The study of this paper could provide reasonable explanations for sharply fluctuated phenomena appearing occasionally in the China's stock market after launching stock index futures trading.Therefore,it improves theoretical and empirical evidence for the inhibiting effect of stock index futures trading on the volatility of Chinese stock market.This study have important theoretical and practical significance to improve the supervision capacity of the securities regulatory authorities,regulate the trading behavior of investors and ensure the healthy and stable development of Chinese stock market.