Research On China Stock Index Futures Influences On The Volatility Of Stock Market Based On GARCH Family Models

Miller,an economist,regards stock index futures as the greatest financial innovation since the1970s,this new trading mechanism has a profound impact on asset management and the operation ofthe stock markets.The volatility of China stock market is so severe that investors urgently needfinancial instrument to effectively avoid risks and preserve their property,which is the reason thatHS300index futures came into being. HS300index futures has a good representation of the marketand anti-manipulation for it covers about60%of the market value of the Shanghai and Shenzhenstock markets. HS300index futures is given widespread concern specially how it affects the stockmarket’s volatility.The author analyzes the mechanism that index futures effects on spot market anduses metering means to accurately analyze the consequence.First of all, the author tries to find out themechanisms from Internal influence mechanism and External influences mechanisms,including thefunction of index futures,the transaction rules, Investment behavior and so on;in addition the writertends to illustrate three questions the role played by the changes in the size of the fluctuations of stockindex futures on the stock market, the impact of continued stock market volatility and stock marketvolatility leverage effect, by empirical means, the most significant is the first one. GARCH familymodels are used in this thesis and there are three innovations, which are analysis of SMEs board,5minutes of high-frequency data and GED for error distribution. During the specific operation,Amended GARCH model is used to prove if HS300index futures can weaken fluctuation of stockspot market,GARCH model is used to illustrate persistence changes of stock market volatility andinformation transferring speed, EGARCH is used to illustrate stock market volatility leverage effectchanges after the introduction of HS300index futures.Basing on the evidence we find that HS300index futures plays a significant but not decisive role in influencing the volatility of stockmarket,however it plays opposite role in two markets.After introducing HS300index futures,persistence of stock market volatility becomes shorted, information transferring speed slows downand the leverage effect also gets weakened.