The Selection And Comparison Of Hedging Models Under Different Stock Market Conditions

The development of China’s stock market is not perfect.In recent years,the fluctuation of stock prices is very unstable,which brings many risks to investors.Futures,as a substitute for spot transfer risk,plays a great role in avoiding spot risk.In 2010,China’s first stock index futures,Shanghai and Shenzhen 300 stock index futures,brought hedging tools for investors in the stock market.Firstly,the daily data of Shanghai-Shenzhen 300 index and futures from 2014 to2019 are selected and divided into bear market,bull market and consolidation market.The hedging ratios are estimated by static model ECM,B-VAR,dynamic model ECM-BGARCH,VECH,BEKK,CCC,DCC model and copula-GARCH model.The validity test is carried out under the condition of minimizing risk and maximizing utility,and get the best hedging model for the daily data of three market conditions.Then the high-frequency data of bear market from 2018 to 2019 are selected to study the hedging model of high-frequency data in specific stock market,and the best hedging model of high-frequency data in specific stock market is obtained.Through empirical research and comparative analysis,it is concluded that whether static or dynamic models,bear market hedging effect is the best and can avoid the most risks.In the daily data,from the perspective of risk minimization,the best hedging models of bull market and bear market are ECM and ECM-BGARCH,respectively.There is little difference in the validity of the two models in the market consolidation.From the perspective of utility maximization,the best hedging models of bull,bear and market consolidation are Gumbel copula-GARCH,full BEKK-GARCH and ECM,respectively.In the study of bear market high frequency data,it is found that the hedging effect increases with the decrease of data frequency.Under the risk minimization,the hedging effect of each model of bear market high-frequency data has little difference;under the maximization of utility,the best hedging models of 5-minute,10-minute and 15-minute high-frequency data are DCC-GARCH,scalar BEKK-GARCH and Clayton copula-GARCH,respectively.The above conclusions indicate the market conditions and data frequencies should be taken into account in the process of hedging,so that investors can choose more effective hedging methods.