TITLE:
The Empirical Study about Introduction of Stock Index Futures on the Volatility of Spot Market
AUTHORS:
Guiliang Tian, Huixiangzi Zheng
KEYWORDS:
Index Future; Spot Market; Volatility; GARCH Model
JOURNAL NAME:
iBusiness,
Vol.5 No.3B,
November
8,
2013
ABSTRACT: April 16, 2010, China’s first
four Index Future contracts have been listed for trading in the stock exchange.
Stock index futures are the world's fastest growing financial derivative
products currently, and the research of them is of significance to the development
of China's
financial market. Therefore, it is particularly important to concern the market
operation status of stock index future after its official listed. As we all
know that there are linkage effects of the futures and spot, stock index
futures market will have some impact on the spot market. Based on the above
point, this study identified the Shanghai
and Shenzhen 300 stock index futures market as the research object, focusing on
what volatility affects the stock index futures have made on the spot market over
the past 3 years. Through empirical findings, we can evaluate the operation
conditions of stock index futures market objectively. This paper applies GARCH model mainly,
and introduce dummy variables, collecting daily trading data between 16 April
2007 and 16 April 2013 on the spot market, and studies the impact of volatility
on the spot market in-depth by empirical test. The results showed that over the
past 3 years, introduction of stock index futures has reduced the volatility of
the spot market which has brought a positive impact.