The impact of the CSI 300 stock index futures: Positive feedback trading and autocorrelation of stock returns

Yang Hou and Steven Li

International Review of Economics & Finance, 2014, vol. 33, issue C, 319-337

Abstract: This study examines the impact of the CSI 300 index futures on the underlying spot market in terms of feedback trading model. A univariate AR-GJR-GARCH-M model and a bivariate VECM–GARCH-M model are employed for the analysis. Our research reveals that the CSI 300 stock index futures market intensifies positive feedback trading in the underlying spot market which is detrimental to the informational efficiency. Furthermore, the CSI 300 stock index futures market attracts positive feedback trading in itself and this may destabilize asset prices of the underlying spot index through the index arbitrage process.

Keywords: Positive feedback trading; AR-GJR-GARCH-M model; VECM–GARCH-M model; CSI 300 stock index futures; Returns autocorrelation (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:33:y:2014:i:c:p:319-337

DOI: 10.1016/j.iref.2014.03.001

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