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The impact of soft intervention on the Chinese financial futures market

Jimmy E. Hilliard and Haoran Zhang

Journal of Futures Markets, 2020, vol. 40, issue 3, 374-391

Abstract: During the 2015 financial crisis in China, participants faced the criticism that manipulators and shorts had destabilized the market. As a result, the Chinese Securities Regulatory Commission intervened sequentially in the spot market and then in the futures market. Trading volume dropped precipitously. Using the cost‐of‐carry model, we find that these actions significantly impacted equilibrium pricing. Following intervention in the spot market, mispricing was attenuated but remained significant after further intervention in the futures market. We use the Hong Kong market and a difference‐in‐differences statistic to address the role of the China Securities Regulatory Commission soft intervention versus intervention by hard rules.

Date: 2020
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