Stock Index Futures Trading And Stock Market Price Discovery

Stock index futures,born in 1980 s,is a way of investing.Gradually,stock index futures developed into an important tool for investors to manage capital market risks.In China,the first time of Stock index futures listed was April 16,2010.The listing of stock index futures means China's financial futures market entering a higher stage of development.Since then,when investing in the stock market,domestic investors have more choices and are no longer merely bullish on a single choice.In addition to the general function of financial futures,stock index futures also has outstanding performance in terms of price discovery and risk aversion.The price discovery is a major function of the futures market,numerous relevant research can be found both at home and abroad in recent years.Most studies have focused on the relationship between stock index futures and the price discovery function of the stock market.Research like the relationship of stock index futures and the spot still need further discussionFirstly,this paper introduced the basic concepts,basic functions and price discovery mechanism of stock index futures and then it gave a detailed statement of the history of stock index futures in China and the development status.Next,this paper investigated the existence of price discovery mechanism of Chinese stock market after the stock index futures launched.In order to analyze the relationship between the two markets and identify the lead and lag relationship between the CSI 300 index futures and the CSI 300 stock index spot,this paper used Vector error correction model.Impulse response function and variance decomposition method also were used to research the strength of price discovery function and dynamic image process between CSI 300 index futures and spot index.And then,the measurement of price discovery function of Stock index futures was researched.Information share model(IS)and permanent short model(PT)based on the Vector error correction model were used in this paper.These two models enables us to calculate the CSI 300 index futures' and the CSI300 index's contribution ratio in price discovery.Through empirical analysis,the following conclusions are drawn:(1)When theCSI300 futures are hit by physical shocks,they can react more quickly and strongly,which reflects the dominant position of stock index futures in price discovery.The variance decomposition results of VAR show that,stock index futures are far more important than spot in price discovery.Comparing the first stage,the price discovery contribution reduced in the second stage;(2)We can conclude based on the IS model,the upper limit of the first stage of the CSI300 index futures contribution is 0.0669,while the lower limit is 0.9991,the mean value is 0.5330,and the mean value of the CSI300 index spot contribution is 0.4670,Similarly,the upper limit of the second stage of the CSI300 index futures contribution is 0.1733,while the lower limit is 0.9995,the mean value is 0.5864,and the mean value of the CSI300 index spot contribution is 0.4136.According to the results of stage one,stage two and the total stage,he average contribution of the index futures price discovery of CSI300 index is greater than that of spot index,which indicates that stock index futures play an important role in price discovery process.(3)We can conclude based on the PT model,the index futures contribution of the first stage is 0.8984,while the index spot is 0.1016,and in the second stage,the index futures contribution is 0.6514 while the index spot is 0.3486,otherwise,in the total sample stage,the index futures contribution is 0.9848 while the index spot is 0.1052,indicating that both stage one and stage two,the CSI300 index futures play a leading role in price discovery.But with the introduction of the 500 index futures,the price discovery contribution of CSI300 index futures has decreased.The two major innovative works of this paper are as follows: first of all,this paper divided the sample time into two parts according to the launch time of Shanghai 50 stock index futures and CSI 500 futures.Secondly,by dividing CSI300 index futures data into two phases for comparative study,Not only can the index futures price discovery function be analyzed in detail,but also can compare the change of the CSI300 index futures price discovery function before and after the introduction of the two kinds of new stock index futures.