CSI300Stock Index Futures Price Discovery And Volatility Spillover

The existence of CSI300index futures has received a widespread and increasingly attention by the supervision, investors, as well as the academic area. Some questions are been focused, including whether the stock index futures market in China as efficient as foreign mature stock index futures; Could the CSI300index futures be an effective tool to averse the risks? Do the two market have a related variation?First of all, this paper introduces the theory of price discovery function and volatility spillover effect. The relevant concepts of stock index futures market’s price discovery function, the reason of stock index futures market has the advantage of price discovery, the internal cause and direct cause of the volatility spillovers will be explained specifically.Secondly, to study the stock index futures price discovery function, this paper selects a series of model for empirical analysis. Firstly, The article summarizes the statistical characteristics of the futures price and spot price;Secondly establish an error correction model to depict the futures and spot prices.To fatherly analyse the relationship between the futures and spots,this paper uses the P-T model to compare the size of the market’s price discovery ability.Thirdly, the article researched the volatility spillover effect.This paper selected the EGARCH model to study the volatility of returns on the futures and spot, respectively. However, a single variable model separates the two markets’ volatility characteristics, without considering the connection between the two. Therefore, a VEC-BEKK-GARCH model is applied to describe volatility spillover effect between the two markets. The advantage of this model also contains reduce the number of coefficients that need to be estimated and guarantee a positive defined variance-covariance coefficient matrix.There are four innovations in this paper. The first, the latest data is used for research and some different conclusions are based on it. The second, distinguished from the day frequency data in the other researches, the high frequency data of5minutes in this paper can fully explain price discovery function of stock index futures and volatility spillover effect. The third, permanent short model of this article is based on the VEC-BEKK-GARCH model, in comparative, previous studies are based on the VEC model. The first model is better, because this model takes the volatility spillover between the markets into account. Lastely, this paper use a VEC-BEKK-GARCH model studies the volatility spillover. In previous studies, the mean equation of the BEKK model is in the form of VAR. And the VECM can be used to describe the error correction term, if the mean equation of the BEKK model is in the form of VECM,it can describe the relationship between the rate of return on futures and spot much better. The results are more significant which also support the conclusions.