Volatility Spillover Effect Between Stock Index Futures Market And Spot Market In China

Stock index futures based on stock price index for the subject matter is one of financial derivatives. Almost all futures species are a result of futures risk, stock index futures is no exception. Since stock index futures was produced in 1982,it has been as an effective and fundamental tool to hedge their risks for investors. Through the stock index futures trading to provide two-way mechanism, investors hedge between the stock and futures markets, and this can effectively strip and shift the stock market's systemic risk. In this current financial crisis, the functions of stock index futures to stabilize the market once again been proven. It is survey: stock market volatility in the countries which have launched on stock index futures should be much smaller than these not launching on. Early in the economic crisis, volume and open interest of stock index futures significantly increased and effectively slowed down the crash type of the stock market. In this context, our country also will lanch on the Shanghai and Shenzhen 300 stock index futures contracts on the April 26, 2010. This will truly open a new era of financial products to ease the market resonance and systemic risk because of the product homogenization.But China's stock index futures market has just been newly established. In order to play to their functions, it is important to study the conduction mechanisms and risk control of the financial derivatives, and volatility spillover is a key to solute this problem. This paper studies the interaction between the different markets in a framework of information, and takes into account the aggregation of volatility, the nature of asymmetric information responsing to the fluctuations and the tommyrot of Constant correlation coefficient, so it selects VAR-DCC-EGARCH model to study volatility spillover effects between China's stock index futures market and stock market. The first, this paper establishes Vector Error Correction Model and analyse the parameters in the model. The conclusion is that there is a two-way short-term price guide between the Shanghai and Shenzhen 300 stock index futures and the Shanghai and Shenzhen 300 index; the Shanghai and Shenzhen 300 index futures dominates the Shanghai and Shenzhen 300 index in price discovery; this reflects that the China's stock index futures trading (Simulation trading) runs better. The second, it establishes EGARCH model of dynamic correlation coefficient. The conclusion is that it exists bi-directional volatility spillover between the two markets; the influence is bigger from the market in Shanghai and Shenzhen 300 index to the Shanghai and Shenzhen 300 index futures market.