China's Stock Index Futures On The Spot Market Price Volatility And Cointegration Test Research

April 16, 2010, China's official stock index futures were up on the stage, one of the most important milestones in the whole history of China's financial markets. According to successful foreign experience, we can see that in mature markets: price discovery function of stock index futures on the spot market impact is positive and effective, it can not only reduce the price of the stock market volatility, but also can relieve, in some extent, the clustering effect of leverage making the market more efficient and response to the price information more quickly. In the process of development of China's HS300 stock, amount of scholars of our country, applying different kinds of statistical models, made a large numbers of empirical researches about the impact which the stock index futures added on the spot market. They leaded to a conclusion that the stock index futures do have a positive effect in our country, which is consistent with the theoretical results.This article firstly introduces the basic concepts about stock index futures and analyzes the relevant logic effects, positive or negative, that the stock index futures presents on the spot market of our country. Then the article describe the some distinct features and the development history of China's stock index futures, which can definitely put a strong groundwork for the next theoretical model analysis.For the purpose of finding the exact interrelationship between the stock index futures price and the stock price, I use the official trading price of stock index futures from the start day of the stock index futures showing on the real market, considering the pre-simulated trading of HS300 may be distorted and cannot reflect the real relation between buyer and the seller. Then,I apply the classic model which most of the western scholars often used ( ARCH, GARCH, EGARCH, TGARCH), to analyze the changes of volatility rate before and after the introduce of the HS300 stock index futures and lead to a conclusion: HS300 stock index futures reduce the volatility rate, in some extent, and ease the clustering phenomenon and smaller the leverage effect in the stock market.In the next part of the empirical analysis the interrelationship between the stock price the futures price, I continue to use the model to do the statistical modeling analysis: Cointegration test, Error-Correction model (ECM), Granger causality test model, concept of Lead-Lag relation. The final result is: stock index futures of our country have a long-term stable relationship with the stock price and and this kind of long-term relation was realized by the short-term dynamic adjustment. Although, according to the results of Granger-causality test, we can see that the spot market and the futures market have a clear mutual causal relationship, the pivotal price discovery function was not appear in the whole process of trading in our country.According to the test results, our financial market is not mature enough to fulfill the whole advantage of the stock index futures, and we should spare no effort to do our best to improve the market environment and the relevant supporting facilities, making sure the stock index futures have a promising future in our country.