Research On Hedging ETF Of Stock Index Futures

Abstract:Stock index futures have the function of hedging, and can effectively avoid systemic risk. Hu-shen 300 stock index futures have been introduced into China on April 16th 2010, which has great significance to securities market. The investors are greatly attracted by ETF which is financial derivation product introduced some years ago, but they know little about them. This essay researches on hedging ETF of Hu-shen 300 stock index futures in order to help those who want to invest in ETF.At first, this paper estimates the relevance between Hu-shen 300 stock index futures and four ETF funds by adopting unit root test, co-integration tests, error correction model and auto-regression model. The results show that the Hu-shen 300 stock index futures and 4 ETF funds have a one-order and long-term equilibrium relationship. Meanwhile, ETF's short-term fluctuations are mainly affected by the Hu-shen 300 stock index futures volatility, and the error correction term of the ETF fluctuation effects is very limited. At the same time, Hu-shen 300 stock index futures volatility is not immediately reflected on the ETF's price volatility, but gradually showing up its impact after some periods.Secondly, the writer employs OLS model, B-VAR model and the ECM model to calculate the optimal hedge ratio and hedging performance and respectively conducts hedging on the data in and out of sample in the research of Hu-shen 300 stock index futures and 4 ETFs hedging performance. The results indicate that the systematic risk of sequence is obsiviously reduced by hedging rather than not. Generally, ECM model has the best performance in the three kinds of static hedging model; the hedging performance of samples out of data is better than that of samples in data. The reason of this is that the basic risk of data out of the chosen samples is dramatically reduced.