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The Impact of Index Futures on Spot Market Volatility in China

Author

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  • Shiqing Xie
  • Jiajun Huang

Abstract

Using daily data of the China Securities Index (CSI) 300 between 2005 and 2012, we employ a set of GARCH models to investigate the impact of index futures trading on the volatility of the spot market in China. Our three main findings are as follows: (1) the launch of index futures does not decrease the volatility of the spot market; (2) there is a decrease in sensitivity to new information while sensitivity to historical information increases after introduction of the CSI 300 index futures; and (3) no leverage effect is found either before or after the introduction of the CSI 300 index futures.

Suggested Citation

  • Shiqing Xie & Jiajun Huang, 2014. "The Impact of Index Futures on Spot Market Volatility in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S1), pages 167-177.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:s1:p:167-177
    DOI: 10.2753/REE1540-496X5001S111
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    Citations

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    Cited by:

    1. Yang Gao & Bianxia Sun, 2018. "Impacts of Introducing Index Futures on Stock Market Volatilities: New Evidences from China," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 21(04), pages 1-23, December.
    2. Jing Hao & Xiong Xiong & Feng He & Feng Ma, 2019. "Price Discovery in the Chinese Stock Index Futures Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(13), pages 2982-2996, October.
    3. Viviano, Davide & Bradic, Jelena, 2023. "Synthetic Learner: Model-free inference on treatments over time," Journal of Econometrics, Elsevier, vol. 234(2), pages 691-713.
    4. Loc Dong Truong & Anh Thi Kim Nguyen & Dut Van Vo, 2021. "Index Future Trading and Spot Market Volatility in Frontier Markets: Evidence from Ho Chi Minh Stock Exchange," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(3), pages 353-366, September.
    5. Miao, Hong & Ramchander, Sanjay & Wang, Tianyang & Yang, Dongxiao, 2017. "Role of index futures on China's stock markets: Evidence from price discovery and volatility spillover," Pacific-Basin Finance Journal, Elsevier, vol. 44(C), pages 13-26.
    6. Zhang, Chuanhai & Chen, Haicui & Peng, Zhe, 2022. "Does Bitcoin futures trading reduce the normal and jump volatility in the spot market? Evidence from GARCH-jump models," Finance Research Letters, Elsevier, vol. 47(PB).
    7. Atilgan, Yigit & Demirtas, K. Ozgur & Simsek, Koray D., 2016. "Derivative markets in emerging economies: A survey," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 88-102.
    8. Zhang, Chuanhai & Ma, Huan & Arkorful, Gideon Bruce & Peng, Zhe, 2023. "The impacts of futures trading on volatility and volatility asymmetry of Bitcoin returns," International Review of Financial Analysis, Elsevier, vol. 86(C).
    9. 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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