Influence of the CSI 300 Index Futures on the Spot Market —An Empirical Analysis Based on the Modified GARCH Model

The impact of CSI 300 Index Futures on the Spot Market is increasingly drawing the attention of theorists and practitioners. We employ the CSI 300 Index sample from 4,January 2007 to 22,July 2011,and use the Shanghai Interbank Offered Rate as an alternative variable at the same period; then we employ modified GARCH model to examine the change of the spot index volatility before and after the CSI 300 index futures traded through the overall regression and stepwise regression method. The results show that the introduction of the CSI 300 Index futures reduces the volatility of the underlying index; meanwhile,the introduction of the CSI 300 index futures speeds up the velocity of information transmission.