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The Empirical Study about Introduction of Stock Index Futures on the Volatility of Spot Market

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DOI: 10.4236/ib.2013.53B024    4,730 Downloads   6,149 Views   Citations

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.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

G. Tian and H. Zheng, "The Empirical Study about Introduction of Stock Index Futures on the Volatility of Spot Market," iBusiness, Vol. 5 No. 3B, 2013, pp. 113-117. doi: 10.4236/ib.2013.53B024.

References

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[2] Antoninus, “Return and Volatility Dynamics in the FT-SE 100 Stock Index and Stock Index Futures Markets,” Journal of Futures Markets, Vol. 15, No. 4, 1995, pp. 457-488.doi:10.1002/fut.3990150405
[3] Xing Tiancai and Zhang Ge, “The Empirical Study about Impact of stock index futures on the spot market - Based on the analysis of the FTSE Xinhua A50,” Research on Financial and Economic Issues, Vol. 4, No. 7, 2009, pp. 83-88.

  
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