The Research On The Impact Of Stock Index Futures On The Volatility Of The Spot Market

In this paper, the closing price of CSI300stock index from January4th,2005toFebruary15th,2012is selected as the original sample. The total number of sample datais1727. In order to reduce the rounding error, we take natural logarithm on the originalsample spt. In other words, the logarithm sequence l n(sp t) is treated as thedependent variable. Thus, the return series is calculated in the method of the1stdifference. The conditional mean equation is in the form of ARMA （p, q）. Accordingto the AIC and SC criteria, the ARMA （1,2） imitates the characteristics of the returnseries of CSI300stock index better.In order to study the impact of CSI300stock index futures on the volatility of thespot market, this paper uses two methods that the standard GARCH and asymmetricGARCH model to fit the full sample. Both of the models bring a dummy variablenamed D. According to the output of the above model, both of the coefficients ofdummy variables D in the standard GARCH and asymmetric GARCH model is lessthan zero. Thus, it can be seen that the overall volatility of CSI stock index weakened.The difference is that the absolute value of the coefficient of dummy variable in thestandard GARCH is less than that in the asymmetric. Usually, there is asymmetriceffect in financial time series. It can be found that the asymmetric effect is existence inthe return series. So the usage of asymmetric GARCH model is more realistic andproven. Therefore, the influence of CSI300stock index futures on the spot market isreductive. And degree of the impact is large.With the purpose of studying the reasons of the influence of CSI300stock indexfutures on the liquidity of the spot market, the paper separates the full sample into twosub-samples by the dividing line of April16th,2010. After the fitting of the standardGARCH （1,1） model, the speed of new news absorbed by the spot market slowsdown, according to, the coefficient of lag residual square item decreased. It indicatesthat the overreaction of spot market from the impact of information, and the spotmarket absorbs new news faster. However, the coefficient of lag conditionalheteroscedasticity increased, it shows that the influence of old news on the spot marketlasts longer. In addition, the impact of old news on the spot market is much lager thanthat of new news on the spot market. The sum of the above two coefficient is veryclose to1, which shows that the influence of news on the conditional variance is persistent.With the purpose to analysis another reason of the influence of CSI300stockindex futures on the index market, this paper applies the asymmetric GARCH model（take EGARCH model as the example）. There are two groups of sample data. One isthe time series before the listing of the CSI300stock index futures. The other one isthe time series from January4th,2005to February15th,2012. The fitting result is thatthe coefficient of asymmetric term becomes smaller. The result shows that the listingof CSI300stock index futures weakened the asymmetric effect of the stock indexmarket. Thus, it further demonstrated that the CSI300stock index futures plays thebasic functions of the stability of the stock index market. This conclusion is consistentwith the conclusion of CSI300stock index futures weakened the volatility of stockindex market. In the same time, it can take the conclusion that the CSI300stock indexfutures plays the basic function of stabilizing the stock market.