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Can the introduction of stock index futures stabilize the volatility of the stock market? Evidence from the Chinese stock market

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  • Liu, Shengnan
  • Yang, Linshan
  • Gu, Rongbao

Abstract

Since the introduction of China's stock index futures in 2010, it has played a decisive role in enhancing the operation of the Chinese stock market, improving pricing efficiency, and clarifying the asset price mechanism. Using the daily closing prices of the Chinese stock market over 2005–2021, this study examined the price discovery and risk spillover effects of CSI 300 index futures on stock market volatility. The results show that (Adnan & Kasman, 2008) there is a two-way linear mechanism volatility spillover effect and (Ahn et al., 2019) a two-way guiding relationship in the nonlinear mechanism between the CSI 300 index spot and futures markets.

Suggested Citation

  • Liu, Shengnan & Yang, Linshan & Gu, Rongbao, 2023. "Can the introduction of stock index futures stabilize the volatility of the stock market? Evidence from the Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 44-58.
    • Handle: RePEc:eee:reveco:v:85:y:2023:i:c:p:44-58
    DOI: 10.1016/j.iref.2023.01.001
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    Cited by:

    1. Fang, Ming & Chang, Chiu-Lan & Zhang, Qi, 2023. "Impacts of trading restrictions on price volatilities and speculative activities: Evidence from CSI 300 futures," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 184-204.

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    More about this item

    Keywords

    Multifractal detrended fluctuation analysis (MF-DFA); Nonlinear Granger causality test; VAR-MVGARCH-BEKK model; CSI 300 index; CSI 300 index futures;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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