Economics, Econometrics and Finance
5 years ago

Stock index futures market in China found effective despite price discovery flaws.

Economic Research-Ekonomska Istraživanja
Empirical study on the efficiency of the stock index futures market from the information and functional perspectives – empirical evidence from China
Qu Yang, Pan Xiong

Paper Summary

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The study looked at how well the CSI 300 stock index futures market in China works in terms of information and function efficiency. They found that the price of stock index futures moves randomly. The average optimal hedge ratio is 0.8702, and the error correction mechanism only works in extreme cases. There is no arbitrage between futures and spots. Stock index futures show both linear and nonlinear leadership, but they can't fully determine prices. Overall, the CSI 300 stock index futures market is effective, even though it has some issues with price discovery.