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

Marcel Ausloos; Gurjeet Dhesi

doi:10.1016/j.eswa.2020.113688

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

Marcel Ausloos, Gurjeet Dhesi

Research output: Contribution to journal › Article › peer-review

20 Citations (Scopus)

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.

Original language	English
Journal	Expert Systems with Applications
DOIs	https://doi.org/10.1016/j.eswa.2020.113688
Publication status	Published - 8 Jul 2020
Externally published	Yes

Keywords

co-integration causality tests
spot price variability
CSI 300 stock index futures
CSI 300 index
index futures trading
TGARCH

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10.1016/j.eswa.2020.113688Licence: CC BY-NC-ND 4.0

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

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.",

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author = "Marcel Ausloos and Gurjeet Dhesi",

year = "2020",

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AU - Dhesi, Gurjeet

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N2 - 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.

AB - 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.

KW - co-integration causality tests

KW - spot price variability

KW - CSI 300 stock index futures

KW - CSI 300 index

KW - index futures trading

KW - TGARCH

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DO - 10.1016/j.eswa.2020.113688

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SN - 0957-4174

JO - Expert Systems with Applications

JF - Expert Systems with Applications

ER -

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

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Keywords

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