Author(s)

Yunyu Zhang

Corresponding Author

Yunyu Zhang

Abstract

The objective is to accurately and comprehensively apprehend the volatility of the stock index futures (SIF) market in China. The Multiplicative Error Model is constructed to research and analyzed the major two Chinese SIF markets, i.e., the Shanghai-Shenzhen 300 Index (SHSZ300) and the China Securities Index 500 index (CSI500). Through the constructed MEM, the index changes of the two major SIF markets, i.e. SHSZ300 and CSI500, in 2015-2018 are studied, and the factors impacting the volatility of Chinese SIF are analyzed and studied. The research results show that MEM plays an essential role in the analysis of the volatility of SIF. The factors affecting the SIF market include market risk, liquidity risk, insider risk, institutional supervision, information, market manipulation, and other risks. In these factors, the insider of the market is considered to be the biggest factor in the volatility of the Chinese SIF market at present. The volatility amplitudes of the two major SIF markets, i.e., SHSZ300 and CSI500, are about 2200-5000 and 4000-12000, respectively. Currently, most investors lack trust in the current environment and system of the SIF market in China. Conclusion: By constructing the MEM, the situations of SHSZ300 and CSI500 from 2015 to 2018 are analyzed, thereby the volatility of SIF is investigated. Among various risk factors, the insider of the market is considered to be the biggest factor in the volatility of the Chinese SIF market at present. Besides, most investors lack trust in the current environment and system of the SIF market in China. The volatility of SIF is a process and result of multiple factors, which requires multiple levels of cooperation and coordination. The research results have greatly improved the comprehension of MEM and SIF volatility.

Keywords

Measurements; Stock index futures; Volatility; System; Investment