The Effects Of Introduction Of Stock Index Futures On Stock Market

April 16,2010, China launched its first stock futures contracts——the Shanghai and Shenzhen 300 stock index futures, which is a milestone in the Chinese stock market. Since February 24,1982, the first stock index futures contract has been launched of the world. The stock index futures has been quickly accepted and developed by many countries and regions of the world since its unique charm and successful operation, and became one of the most widely used financial futures. The stock index futures market has been very mature after 20 years of development in major western developed countries. The stock index futures play an important role in stabilizing the spot market. In our country, the stock index futures just launched soon, so there are some problems in system and legal. It is urgent to study these problems in the process of introduce stock index futures, and absorb the experiences and lessons of the development of stock index futures in the mature markets and emerging markets, and provide reference on of stock index futures for our country.In this paper, qualitative analysis and mathematical analysis have been combined to study the impact of the introduction of stock index futures on the spot market. This paper studies these three regions, as Hong Kong, Taiwan and mainland China are closely related in economics and cultural. We can find the similarities and differences through compare the results of the three areas. The conclusions are more targeted and persuasive which we got are based on the analysis of the similarities and differences of thee three region. Due to the real data which can be used to analyze is too short, in this paper, we use the simulation trading data of Shanghai and Shenzhen 300 index futures to instead of the actual transaction data.The study of this paper is expanded in two ways:First, examine the long-run equilibrium relationship between stock index futures and stock index after the introduction of stock index futures. Second, study the change in stock market volatility after the introduction of stock index futures. For the first research, we can establish co-integration and error correction model for stock index futures price series and stock index series. For the second research, we can construct the GARCH, TARCH arid the EGARCH model for the two stages before and after the introduction of stock index futures.The study indicates that there is a long-term positive correlation relationship between index futures and stock index in Hong Kong, Taiwan and mainland China. When the stock index deviated from the long term equilibrium, the equilibrium trend will adjust the non-equilibrium station to the equilibrium station; the error correction coefficient can measure the power of the adjustment intensity. The results showed that the Hang Seng Index can return to the equilibrium fast after it deviate from the long-run equilibrium; while Shanghai and Shenzhen 300 Index return to the equilibrium slowly.To study the issue that the effect of the introduction of index futures on the stock market volatility, we establishment a GARCH (1,1) model with a virtual variable. The results showed that the introduction of Hang Seng Index futures reduce the stock market volatility of the spot, but the stock market volatility of Taiwan and mainland China became larger after the introduction of stock index futures. Through the further analysis on Taiwan and mainland China's stock markets, we can get the increase of China's stock market volatility increased is not due to the simulation trading of index futures; while the increase of Taiwan's stock market volatility is due to the introduction of stock index futures, but such fluctuation is due to the increase of asymmetric effect and only perform in short-term.To study the issue that the effect of the introduction of index futures on the asymmetric effect in spot market, we introduced the concept of asymmetric ratio to characterize the changes of asymmetric effect which value is the impact of bad news divided by the impact of good news. We establish TARCH and EGARCH model on the spot market of Hong Kong, Taiwan, mainland China and find that the introduction of stock index futures will increase the asymmetric effect of the spot market.