The Impact of Index Futures on Spot Market Volatility in China

Shiqing Xie and Jiajun Huang

Emerging Markets Finance and Trade, 2014, vol. 50, issue S1, 167-177

Abstract: Using daily data of the China Securities Index (CSI) 300 between 2005 and 2012, we employ a set of GARCH models to investigate the impact of index futures trading on the volatility of the spot market in China. Our three main findings are as follows: (1) the launch of index futures does not decrease the volatility of the spot market; (2) there is a decrease in sensitivity to new information while sensitivity to historical information increases after introduction of the CSI 300 index futures; and (3) no leverage effect is found either before or after the introduction of the CSI 300 index futures.

Date: 2014
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DOI: 10.2753/REE1540-496X5001S111

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