Stock Index Futures Trading Impact on Spot Price Volatility. The CSI 300 studied with a TGARCH model

Journal article


Ausloos, M, Zhang, Y and Dhesi, G (2020). Stock Index Futures Trading Impact on Spot Price Volatility. The CSI 300 studied with a TGARCH model. Expert Systems with Applications. https://doi.org/10.1016/j.eswa.2020.113688
AuthorsAusloos, M, Zhang, Y and Dhesi, G
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 CSI-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.

KeywordsTGARCH; CSI 300 index; CSI 300 stock index futures; index futures trading; spot price variability; co-integration causality tests
Year2020
JournalExpert Systems with Applications
PublisherElsevier BV
ISSN0957-4174
Digital Object Identifier (DOI)https://doi.org/10.1016/j.eswa.2020.113688
Publication dates
Print08 Jul 2020
Publication process dates
Accepted21 Jun 2020
Deposited18 Jul 2020
Accepted author manuscript
License
File Access Level
Open
Page range113688-113688
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