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Intraday Volatility Dynamic between Stock Index and Index Futures in China

Yu Zhen, Wang Susheng

Abstract


This study examines the minute-by-minute volatility dynamics between CSI 300 (China Securities Index 300) index and index futures. The return series of spot and futures are stationary with volatility clustering. Bivariate Generalized Autoregressive Conditional Heteroscedastic (GARCH) (1, 1) model with Baba, Engle, Kraft and Kroner (BEKK) parameterization is employed to examine the volatility dynamics, and get the evidence of bidirectional volatility spillovers between spot and futures market. Furthermore, shocks in futures market have negative spillovers effects due to short sale restriction in stock market. These findings have significant implications for traders in risk management, and also for policymakers in market surveillance.

Keywords


index futures, intraday volatility dynamics, volatility spillover, bekk-garch.

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