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Stock index futures trading impact on spot price volatility. The CSI 300 studied with a TGARCH model

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  • Marcel Ausloos
  • Yining Zhang
  • Gurjeet Dhesi

Abstract

A TGARCH modeling is argued to be the optimal basis for investigating the impact of index futures trading on spot price variability. We discuss the CSI-300 index (China-Shanghai-Shenzhen-300-Stock Index) as a test case. The results prove that the introduction of CSI-300 index futures (CSI-300-IF) trading significantly reduces the volatility in the corresponding spot market. It is also found that there is a stationary equilibrium relationship between the CSI-300 spot and CCSI-300-IF markets. A bidirectional Granger causality is also detected. ''Finally'', it is deduced that spot prices are predicted with greater accuracy over a 3 or 4 lag day time span.

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  • Marcel Ausloos & Yining Zhang & Gurjeet Dhesi, 2021. "Stock index futures trading impact on spot price volatility. The CSI 300 studied with a TGARCH model," Papers 2109.15060, arXiv.org.
    • Handle: RePEc:arx:papers:2109.15060
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    File URL: http://arxiv.org/pdf/2109.15060
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