The Characteristic Of Stock Index Futures Price And The Impact On The Spot Price

The stock index futures contract is one of the most successful financial innovations in the world. This contract has been developed rapidly since Kansas Futures Exchange launched the first stock index futures contract of the world in1982. After twenty years development, the trading volume of stock index futures contracts rise to the second place of all financial innovations, just after interest rate futures.Attributed to specific hedging function and price discovery function, the stock index futures developed fast. The stock index futures not only to be respected by satisfying investors to diversify risk and improve the efficiency of resource allocation, but also to be suspected by it’s characteristic of high-risk and high leverage. Domestic and foreign scholars are focusing on the point that the impact of stock index futures before or after the introduction and across the transaction process. Scholars had conducted series in-depth discussions and had got a large number of achievements which convenient participants and regulators to know more about the future market and also provided advices and opinions.The domestic stock index futures of CSI300index was finally launched on April16,2010after several setbacks. So researches on this field are very limited, not only the direction of studies but also the number of researches. Through a great number of literatures, the researcher found that there are no domestic scholars do some studies based on the perspective of time-varying jump by far. Therefore, the researcher decided to choose this direction as his master’s thesis.In theory, the futures market has hedging, speculative, price discovery and resource allocation function. The rapid and sensitive response to market information has some leading function to spot market was confirmed by foreign researchers. From this we can know the significance of study stock index futures is important to spot market. At the same time, more researchers focused on exploring the relationship between stock index futures and spot. Throughout a great number of literatures, I found most of academic studies are based on more stringent assumptions:The price of stock index futures is smooth and continuous change. But the author found that the price doped jumping behavior in a smooth motion from both the real-life experience and the results of theoretical analysis which were confirmed by foreign academic study. At the same time, there are no Chinese scholars studied the phenomenon of stock index futures price, so I think it is very necessary to study this phenomenon. Undeniable, the leading role of stock index futures and the jumping behavior of futures price are bound to influence the formation of spot prices, which is conducive for understanding the formation mechanism and operating characteristics of spot price through study the price characteristic of stock index futures. This study also has a vital role to understand the securities market and avoid market-risk for participants and regulators of securities market.Therefore, the author explored the time-varying characteristics of stock index futures at first. Then depended on the previous step and results, the author studied the influence from time-varying jump behaviors and price discovery function onto spot price. Through this study, the author wish the result of this paper would provide some advice for participants and regulators, and do some contributions to the healthy development of securities market.Based on the summary and reference result from foreign studies, the author studied the characteristics of stock index futures price and other relevant studies through six chapters below.The first chapter is introduction. Mainly summary and predict for the full text. In this section, the author expounded the research background and significance, as well as the main content, the research mentality, the main study methods, the article overall framework, innovation points and deficiencies of this article in detail. And the author also introduced the theoretical basis briefly.The second chapter is literature review on stock index futures related research. In view of different research points, the author carried on the literature review of stock index futures from two aspects. One aspect, the author reviewed related researches and expounded the achievements about the relationship between futures and spot of domestic and foreign scholars. On the other hand, due to jump models used in this paper are relatively new, so this article reviewed jump models based on evolution process. The author hopes, across the literature review, people understand the whole evolution process and other representative models which extended from the evolution process. Meanwhile, the author briefly introduced the advantages and disadvantages of various jump models, which would provide theory support for the final jump model selecting.The third chapter is model introducing. The author studied the characteristic of stock index futures prices with GARCH model, constant jump intensity model, ARJI model, ARJI-Rt-12model and ARJI-h model. Considering the high degree of similarity between jump models, the author did much work on theoretical assumptions, model deriving and model application of all models using in this paper which is used to make people know more about the difference between these models. At last, the author briefly introduced the basic principle on how to impact the spot price by jump behavior of futures prices which laid the foundation for the further in-depth study.Chapter4is the descriptive statistics of data. In this chapter, the author introduced acquisition and processing processes of stock index futures data and spot data. Meanwhile, some statistical operations were done with detailed introduction.The fifth chapter is the empirical part. In this chapter, the GARCH model and various jump models were used to research the characteristic of stock index futures price data. From the result, we found that characteristics of smooth, continuity and time-varying were both existed, which declares stock index futures price index would have different performances that were affected by the different information. Affected by usual information, the stock index futures price will be changed with smooth, continuity characteristic. But under the abnormal information, the stock index futures price will be rapid changed with jump. The empirical results show that the futures prices tend to change time to time and the constant jump intensity model used to describe the stock index futures prices jumping behavior is inadequate. Through the empirical results, we found the variance of jump size was more influenced by the conditional variance of last term’s return but less influenced by last term’s return. Synthesize all the price information of various jump models that we got from this empirical study which represent the response to market stimulation. We found stock index futures pricing information had a certain lag to the market reaction and a phase lag can better response to market stimulation.In the last section of chapter5, the author used the conclusion above to study the price discovery function of stock index futures and the impact on spot price volatility. Results show that the futures price jump behavior played a function of price discovery to spot prices and volatility behavior of spot prices impacted by jump behavior significantly. One-order-lag of jump effects spot price volatility more significantly influenced by the absorption rate.The last chapter is conclusion and suggestion. The author summarized the empirical results and expounded research results in detail. Meanwhile, based on the results of this article, the author gave different suggestions to various market participants and outlook the related future research.