The Empirical Research Of Hu-shen 300 Stock Index Futures Optimal Hedging Ratio

Stock index futures is a kind of financial derivative product used to control and avoid the risk of product of mark, we can't deny it exist great risk, but for its good hedging function makes continuously increased in the share of financial futures, the development speed is amazing.In 2006 China securities market has undergone the earth-shaking changes, with the sustained growth rapid China's economic and the securities market scale steadily growing, the largest scale bull market opening up. The most important thing is the equity division reform come to an end which means the largest Chinese stock market institutional shortcoming has been mostly cured. So the condition of pushing out stock index futures is ripe. Meanwhile Singapore stock exchange introduced Xinhua fushi A50 stock index futures in 2006, greatly stimulated the China securities officials worry about the determination of the price of stock market slipped. In September 2009, the China financial futures exchange founded in Shanghai, marks the our futures markets into a new era of financial innovation and soon introduced the simulation trading of Hu-shen 300 stock index futures. From the gold exchange had been established, Most people believed that the stock index futures market would be rolled out at the end of 2006, and then the whole market are waiting for stock index futures during all the 2007 year, The breaking of financial crisis to market make the enthusiasm greatly subsidized for the stock index futures, but the hole market know the importance of hedging. Until 2010, all the preparations had been completed, stock index futures had once again become the focus of attention, finally it came on the scene and officially listed for trading in April 16.Two risks both in the market, Non-systematic risk can be cancelled off by portfolio investment. But there must be have relevant tools to avoid systematic risk. Especially our emerging markets, more systemic risk, added with our country stock index futures has just been introduced and the lacking of systematic research of domestic stock index futures hedging strategies. One of the characteristics of China's stock market is fluctuating and large systemic risk. The stock index futures are just the tools deal with the risk for our country. Although the Stock index futures hedging avoid the risk of the spot market, hedging effect was affected by many kinds of factors. Hedging is not only the main functions of the futures market, which is also the reason of its existence and the development.So hedging is the main way of eluding market systemic risk. To make stock index futures hedging achieve good results, the key lies in the determination of hedging ratio, which means the correct estimation of hedging rate of play key role for hedging functions. As a result the research of stock index futures hedging has the vital significance for China's institutional investor.With the development of times series econometrics, many scholars find the traditional method always make the wrong estimation for the minimal risk hedging ration. Meanwhile with the increased usage of econometrics development tools for investment management model, there are some new research and method on the minimal risk hedging ratio. So it slowly grow up two kinds of methods, one is the time-varying hedging ration, which contain DCC,CCC,BEKK VECH and some else, the other is nonlinear models with Copula function.The mentality of the writing as follow:in the first chapter, stating the background and significance of the research for choosing the optimal Hu-shen 300 stock index futures hedging ratio and summarizing literatures both at home and abroad. The last part of the first chapter it's the layout structure of my article. In the second chapter, first roughly review the development history of the stock index futures in the world and our China, then giving some of the important concept to a more detailed explanation. Especially in this part giving the analysis of their advantages and disadvantages of the three kinds of stock index futures hedging ratio estimated model, which covers the content as follows. Fixed hedging ratio model contains OLS model, VAR model, EC model. Time-varying hedging ratio model contains the DCC, CCC, BEKK and VECH model. Nonlinear hedging ratio models using Copula function as the medium. The third chapter is the part of empirical study, this article choose 60 market value bigger, good fluidity, with industry representative from the Hu-shen 300 stock index constituent stock in circulation and respectively in accordance with the market value of the 40,50 and 60 spot combination, then analyzing the correlation and tracking error between combination and Hu-shen 300 stock index, which also confirm the feasibility by using a series of fixed stocks form Hu-shen 300 stock index constituent stock to construct the spot combination. According to the characteristics of the data selected OLS, B-VAR and Copula-GARCH model for empirical research and evaluated the three model of hedging ratio by the measure of risk-return. The fourth part is the conclusions and suggestions based on empirical conclusion to provide the investors with the theory and the practice support.