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An Empirical Study of Hedging Ratios of Stock Index Futures

Author YuLiang
Tutor LiWei
School Shanghai Academy of Social Sciences
Course Industrial Economics
Keywords stock index futures hedging OLS model B-VAR model GARCHmodel
Type Master's thesis
Year 2013
Downloads 7
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China’s securities market has experienced20years of rapid development. On April16,2010launch of stock index futures ended China’s stock market unilateral nature, truly long-short two-track. Shanghai and Shenzhen300stock index futures contracts listed on stock index futures short makes institutional investors effectively avoid the spot market volatility, increasing the value of assets to achieve the function, the listing of stock index futures contracts have greatly enriched the country’s financial market innovations.The introduction of stock index futures primarily for our securities, funds, trusts provide hedging opportunities for investors, stock index futures hedging is mainly to circumvent China’s A share market systemic risk. Hedge ratio hedging efficiency has become an important measure of the level.This paper around the stock index futures market, the spot market risk hedging function as core issues, put forward China’s CSI300stock index futures market played what rota in the problem on the spot market, while hedging stock index futures to achieve its market hedging functionimportant ways, the hedge ratio is the only measure of hedging efficiency indicators to study the function of the stock index futures, hedging efficiency commenced, details the importance of the hedge ratio, optimal hedgeperiod increasing the ratio determined as well as hedging rate of inspiration for the development of China’s stock index futures market. Use three models in different cycles, respectively, for the CSI300index futures hedging efficiency analysis, the OLS model still hedging highest efficiency; cycle from short-term to medium-term and then long-term hedge ratio gradually increased hedging efficiency remain high, this shows that China’s market of more than two years running, gradually adding institutional investors, making China’s market slowly toward a good development.In addition, from a comparison of the commodity futures and mature national stock index futures and CSI300index futures hedging efficiency compared with the three obvious conclusions that can be drawn is gold commodity run longer, specialized banks, investment institutions to participate more hedge ratio was significantly higher than the current hedge ratio of stock index futures, efficient hedge against inflation, the mature stock index futures development should learn from China’s stock index futures market has yet to be further developed. Finally, the paper discusses the relationship of the stock index futures market and the spot stock market mutual guide price discovery and risk hedging function, the final conclusions of the study highlight with the CSI300index futures hedging function of stock index futures play, the stock market index in volatility in the futures markets driven declining stock index futures price discovery function has appeared effective in improving market participation structure. Finally, the paper points out the strengths and weaknesses of China’s stock index futures market, made some suggestions for both spot defects of the stock market.

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