Index Futures Trading Restrictions and Spot Market Quality: Evidence from the Recent Chinese Stock Market Crash

Index Futures Trading Restrictions and Spot Market Quality: Evidence from the Recent Chinese Stock Market Crash

Using a difference‐in‐difference approach, we find that restrictions placed on the CSI 300 and CSI 500 index futures trading during the recent Chinese stock market crisis deteriorated spot market quality, particularly the September trade restrictions. Our results can be explained by the sudden risk...

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Veröffentlicht in:The journal of futures markets 2017-04, Vol.37 (4), p.411-428
Hauptverfasser: Han, Qian, Liang, Jufang
Format: Artikel
Sprache:eng
Schlagworte:
China
Futures market
Futures trading
Securities markets
Stock exchanges
Stock market crashes
Trade restrictions
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Zusammenfassung:Using a difference‐in‐difference approach, we find that restrictions placed on the CSI 300 and CSI 500 index futures trading during the recent Chinese stock market crisis deteriorated spot market quality, particularly the September trade restrictions. Our results can be explained by the sudden risk exposure faced by alpha‐strategy traders who stop trading spots after the index futures trading restrictions are introduced, thus worsening the spot market quality. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 37:411–428, 2017
ISSN:0270-7314
1096-9934
DOI:10.1002/fut.21825