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The impact of soft intervention on the Chinese financial futures market

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  • Jimmy E. Hilliard
  • Haoran Zhang

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.

Suggested Citation

  • Jimmy E. Hilliard & Haoran Zhang, 2020. "The impact of soft intervention on the Chinese financial futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(3), pages 374-391, March.
    • Handle: RePEc:wly:jfutmk:v:40:y:2020:i:3:p:374-391
    DOI: 10.1002/fut.22076
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    References listed on IDEAS

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    7. Jimmy E. Hilliard & Haoran Zhang, 2019. "Regulatory Soft Interventions in the Chinese Market: Compliance Effects and Impact on Option Market Efficiency," The Financial Review, Eastern Finance Association, vol. 54(2), pages 265-301, May.
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    Cited by:

    1. Ye, Wuyi & Chen, Pengzhan & Shi, Yining & Liu, Xiaoquan, 2022. "Trading restriction and the choice for derivatives," International Review of Financial Analysis, Elsevier, vol. 82(C).

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