The Empirical Research On The Impact Of Stock Index Futures On Stock Market Volatility Of China

As an institutional reform, the introduction of HS300 stock index futures not only improved our country`s capital market operation mechanism, ended the history of unilateral operation, lacking of long-short two-way trade and short sales mechanism in our stock market. Moreover, the transaction scale of stock index futures develops rapidly and trade actively since its launch in April 16 th, 2010. It`s has become one of the important parts of Chinese financial markets. With the initial stage of 50 ETF and 500 ETF stock index futures trading, it`s important to systematically exam the impact of HS300 stock index futures on our stock market`s volatility since it listed, assess its impacts on promoting investors hedging and enhancing the efficiency of asset allocation or stabilizing markets. That plays an important role in perfecting current operation and supervisory mechanism, deepening capital market reform, building a more complete financial market.From the impact of stock index futures to spot market, except for playing its function in hedging, price discovery and etc in daily transactions,or helping investors to screed fluctuations risk in spot market,the role of the stock index futures market more reflect on financial crisis and emergencies events.So,this paper based on two basic points which were the impact of the stock index futures market to spot market in daily transactions and the playing of macroeconomic stability function in emergencies events. It reviewed the development process of foreign stock index futures and its function, analyzed the mechanism of action and route of stock index futures market to spot market. On that basis, it adopted 5 minutes high-frequency daily trading data, using GARCH(1,1) model, empirical researched on the impact of the stock index futures market on spot market in nearly five years after launched. At the same time, it reviewed and comparative analyzed stock index futures’ market performance, the implementation mechanism of promoting spot market stability in the international financial crisis. Based on this, it objectively analyzed the trading quantity and price dynamic relationship on which the unexpected “Everbright Oolong” financial events happened, using VEC model and mpulse response function empirical researched the price casual relationship between stock index futures and spot markets, assessed Chinese stock index futures` effect on reducing stock market volatility and maintaining macro-market stability on Everbright Oolong events.The empirical research of Chinese stock index futures in daily transactions showed HS300 stock index future decreased volatility in spot market to some extent, but the effect is relatively limited.That maybe because we are at the initial stage of stock index futures market, the trading system needs to be improved, variety of stock index futures are still less, investors structure and their trading strategies are immature. In the future, with the development of the stock index futures market operation mechanism, the improvement of investor structure and trading strategies, the role of stock index futures in reducing the spot market volatility will further play effectively.In addition, through researching on the unusual relationship between quantity and price in our stock index futures market and spot market when “Everbright Oolong” happened, August 16 th, 2013, we find both the stock index futures market and spot market appeared particular changes on that day. Especially in the futures market, many institutional investors use stock index futures to hedge hedging and arbitrage trading, the empirical results of VEC model and impulse response function shows that, the stock index futures price guide spot market price on the “Everbright Oolong” events, the futures market reacted more sensitively in facing the suddenly shock of spot market, but stock index futures have more impacts on spot market. It showed that our stock index futures played an important role in price discovery, macro-stability and "sound" in this incident. At the same time, “Everbright Oolong” incident also exposed the problems in market risk regulatory, institutional investors risk controls and etc. Particularly in quantitative investment and high frequency trading, the related systems in risk management and financial control need to be improved.From the research above, this paper puts forward policy recommendations to further improve our operational and regulatory mechanism of stock index futures, enhance efficiency in stock index futures market, lead investor behavior and etc.