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GZIFF037.pdf

Article Title : The Impact of Index Futures Trading on Volatility of Spot Price in Chinese Market
Author(s) : Ruirui Yan
Corresponding Author : Ruirui Yan
Keywords : CSI 300; Stock Index Future; Volatility; GARCH-M.
PDF : http://download.BCPub.org/proceedings/2020/GZIFF2020/GZIFF037.pdf
Abstract

The purpose of this research is to figure out the effects on the volatility of the Chinese stock market, CSI 300, by introducing the stock index future. Two research questions have been posed: Does the introduction of stock index future affect the volatility of the Chinese stock market? If it is so, does it enhance or decrease the volatility of the Chinese spot market? Two research hypotheses are provided here: One is that the volatility of the Chinese spot market being affected by the future market is declined and the effect is significant. Then, the alternative one is that the volatility of the Chinese spot market being affected by the future market is not declined and the effect is not significant. To get the conclusion of the question, descriptive statistics, ADF test, autocorrelation test and partial autocorrelation test, auto-regressive and moving the average model, Lagrange Multiplier test on autoregressive conditional heteroskedasticity, GARCH-M model are conducted. The study uses a daily time series from 2010 to 2018 on the CSI 300 index stock market. The answer to the research question is that the stock index future can effectively reduce the Chinese spot market volatility, but the effect is limited.

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