The Prediction for Index Futures Returns and the Relational Analysis of Spillover Effect

Purpose Focusing on the spillover effects between the CSI 500 stock index futures market and its underlying spot market during April to September 2015, the purpose of this paper is to explore whether Chinese stock index futures should be responsible for the 2015 stock market crash. Design/methodology/approach Using both linear and non-linear econometric models, this paper empirically examines the mean spillover and the volatility spillover between the CSI 500 stock index futures market and the underlying spot market. Findings The results showed the following: the CSI 500 stock index futures market has significant one-way mean spillover effect on its spot market. The volatility in CSI 500 stock index futures market also has a significant positive spillover effect on its spot stock market, and the mean value of dynamic correlation coefficient between the two market volatility is 0.4848. The spillover effect of the CSI 500 stock index futures market on the underlying spot market is significantly asymmetric, characterized by relatively moderate and slow during the period of the markets rising, yet violent and rapid during the period of the markets falling. The findings suggest that although the stock index futures itself was not the “culprit” of Chinese stock market crash in 2015, its existence indeed accelerated and exacerbated the stock market’s decline under the imperfect trading system. Originality/value Different from the existing literature mainly focusing on CSI 300 stock index futures, this paper empirically examines the impact of the introduction of CSI 500 stock index futures on 2015 Chinese stock market crash for the first time.

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The Liquidity Spillover Effects Between the Stock Index Futures and Spot Under the Fractal Market Hypothesis

10.21203/rs.3.rs-933613/v1 ◽

2021 ◽

Author(s):

Jingyang Zhang ◽

Xu Wu ◽

Ruzhen Yan ◽

Zhengjie Chun

Keyword(s):

Spillover Effect ◽

Spillover Effects ◽

Efficient Market Hypothesis ◽

Stock Index ◽

Stock Index Futures ◽

Market Theory ◽

Index Futures ◽

Futures Contract ◽

Extreme Risk ◽

Maturity Period

Abstract In recent years, the extreme risk events occurred frequently in the financial market have not only brought huge losses to investors and inflicted heavy losses on the market, but also posed a severe challenge for the traditional effective market hypothesis. These extreme risk events are often accompanied by sudden plummeting of liquidity. Different from the efficient market hypothesis(EMT), firstly, this paper studies the nonlinear fluctuation characteristics and causes of contracts with different maturity periods in China stock index futures market under the framework of fractal market theory and using the multifractal detrended fluctuation model Secondly, under the framework of the fractal market theory, the existence of the liquidity spillover effect between the stock index futures and spot is tested, the direction, intensity, and contribution of spillover between stock index futures and spot are analyzed. Finally, there is a robustness test. The study finds that both stock index futures and stock index spot in China have obvious nonlinear fractal fluctuation characteristics, and stock index futures have higher degree of multifractal, the characteristics are related to correlated multifractal and distributed multifractal; the longer the maturity period of the stock index futures contract, the lower the multifractal degree; there are significant asymmetric liquidity spillover effects between the stock index futures and spot; the multifractal degree has an important influence on the intensity and contribution of the liquidity spillover effect, and the multifractal degree is inversely proportional to the intensity of liquidity spillover and the contribution of spot to futures fluctuations.

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Basel III: In quest for criteria and scenarios of the banking regulation reform advancement

Voprosy Ekonomiki ◽

10.32609/0042-8736-2016-2-77-93 ◽

2016 ◽

pp. 77-93 ◽

Cited By ~ 1

Author(s):

E. Dzhagityan

Keyword(s):

Financial Regulation ◽

Cost Optimization ◽

Spillover Effect ◽

Regulatory Reform ◽

Banking Regulation ◽

Capital Adequacy ◽

Basel Iii ◽

Eurasian Economic Union ◽

Downward Pressure ◽

Crisis Recovery

The article looks into the spillover effect of the sweeping overhaul of financial regulation, also known as Basel III, for credit institutions. We found that new standards of capital adequacy will inevitably put downward pressure on ROE that in turn will further diminish post-crisis recovery of the banking industry. Under these circumstances, resilience of systemically important banks could be maintained through cost optimization, repricing, and return to homogeneity of their operating models, while application of macroprudential regulation by embedding it into new regulatory paradigm would minimize the effect of risk multiplication at micro level. Based on the research we develop recommendations for financial regulatory reform in Russia and for shaping integrated banking regulation in the Eurasian Economic Union (EAEU).

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