The economic sources of China's CSI 300 spot and futures volatilities before and after the 2015 stock market crisis

Qiang Chen and Yuting Gong

International Review of Economics & Finance, 2019, vol. 64, issue C, 102-121

Abstract: The 2015 Chinese stock market crisis has increased focus on the factors that determine the volatility of stock spot and futures markets. In this paper, we investigate the economic sources of CSI 300 spot and futures volatilities before and after the stock market crash based on the generalized autoregressive conditional heteroskedasticity model with the mixed frequency data sampling scheme (GARCH-MIDAS). It shows that the risks of the CSI 300 Index tend to increase with higher inflation, lower economic growth, tighter credit conditions and more variant credit policies, while the risks of CSI 300 futures tend to increase with higher inflation, tighter credit conditions, more variant inflation rates and more variant credit policies. The effects of economic fundamentals are greater and more prolonged than the effects of economic uncertainty and speculative trading. Investors are advised to pay attention to the changes in price levels, economic development and credit policies when managing their portfolio risks. More importantly, as speculation has contributed little to the risks of CSI 300 futures in the post-crisis period, regulators are advised to ease trading restrictions and resume index futures trading gradually.

Keywords: CSI 300 index; CSI 300 futures; GARCH; Mixed-data sampling; Stock market crisis (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:64:y:2019:i:c:p:102-121

DOI: 10.1016/j.iref.2019.05.017

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