Can stock index futures reduce stock market volatility effectively?
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| Title | Can stock index futures reduce stock market volatility effectively?
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| Author | Li Junfeng, Hu Dejia and Su Zhi |
| Organization | Central University of Finance and Economics |
| Email | lijf@cufe.edu.cn |
| Key Words | Stock Index Futures ；Stock Market ； Volatility ； GARCH model |
| Abstract | Based on the historical data from mature and emerging markets, this paper studies the stock index futures of different stages of development for the impact of volatility in the stock market. By introducing dummy variables, GARCH model is developed respectively to deal with the changes of the volatility in the cash market when the introduction of stock index futures is seperated into three stages of short, medium and long-term. The results show that: before and after the introduction of index futures on the spot within 120 days of market, the volatility tends to increase, but this effect is not significant. With the development of stock index futures market, the delivery process of the volatility in the stock market presents the stabilizing effect on stock market volatility from the stock index futures is gradually reflected. |
| Serial Number | WP642 |
| Time | 2014-08-05 |
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