The Effect of Index Futures Trading on Volatility: Three Markets for Chinese Stocks
Martin T. Bohl,
Jeanne Diesteldorf and
Pierre Siklos ()
No 3614, CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster
This paper examines whether the introduction of Chinese stock index futures had an impact on the volatility of the underlying spot market. To this end, we estimate several Generalized Auto-Regressive Conditional Heteroscedasticity (GARCH) models and compare our findings for mainland China with Chinese index futures traded in Singapore and Hong Kong. Our results indicate that Chinese index futures decrease spot market volatility all three spot markets considered. In contrast, we do not obtain the same results for the companion index futures markets in Hong Kong and Singapore. China’s stock market is relatively young and largely dominated by private retail investors. Nevertheless, our evidence is favorable to the stabilization hypothesis usually confirmed in mature markets.
Keywords: Chinese Stock Markets; Index Futures; Volatility Spillovers (search for similar items in EconPapers)
JEL-codes: G10 G14 G15 G18 (search for similar items in EconPapers)
Pages: 49 pages
New Economics Papers: this item is included in nep-cna, nep-sea and nep-tra
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Journal Article: The effect of index futures trading on volatility: Three markets for Chinese stocks (2015)
Working Paper: The effect of index futures trading on volatility: Three markets for Chinese stocks (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cqe:wpaper:3614
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