Relative Basis Of Stock Index Futures And Its Predictive Power For Relative Returns Of Futures

This paper puts forward the concept of relative basis of stock index futures,which is defined as the difference of basis of different stock index futures and contains the cross-sectional information of stock index futures.Previous researches on stock index futures mainly focus on single variety,lacking of cross-sectional information.This paper attempts to take the relative basis as the entry point and seek valuable information from the difference of different stock index futures.This paper mainly studies three issues.Firstly,does the relative basis of stock index futures has the feature of mean reversion?Secondly,can the relative basis of stock index futures predict the relative returns of stock index futures?Thirdly,is the predictive power of relative basis on relative return is related to arbitrage activities?The conclusions of this paper through the study of China's three stock index futures are following.Firstly,similar to the basis,the relative basis of stock index futures also has the feature of mean reversion,which reflects that the investors in stock index futures market are rational.Moreover,the results of the STAR model show that the two of three are characterized by nonlinear mean reversion.Secondly,in the period of weak speculation and low volatility,the relative basis of stock index futures has significant negative predictive power to the relative returns of futures,but in the periods of strong speculation and low volatility,the predictive power is not significant.By studying the relationship between relative sentiment,relative basis and relative return,it is found that the predictive power of relative basis to relative return has nothing to do with investors' irrational factors.Thirdly,in this paper,samples are divided according to the degree of deviation from the mean value of relative basis,and it is found that the predictive power of relative basis on futures'relative returns is more significant in the period of large deviation.Therefore,this paper argues that arbitrage may have some explanatory power to the predictive power.