Summary: Summary: The role of financial derivatives in stabilizing the spot market has always been a concern of macro policy makers and academics. Stock index futures played a role in the 2015 A-share stock market crash by promoting spot volatility, and knowing whether China's Treasury bond futures could repeat this role is key to preventing systemic risks in the financial market in the context of China's continuous financial deleveraging and strong supervision. In a developed Treasury bond futures market, the inherent characteristics of a futures market, such as leverage trading, low cost, and low short-selling restrictions, have a stabilizing effect on the spot market. However, China has an immature futures market, and it is necessary to improve market functions and mechanisms. Macro financial security and financial market stability require regulators to clarify the intrinsic function and role of futures and to minimize the negative effects of financial derivatives. The traditional analytical framework ignores the financial cycle risk and its superposition on the economic cycle. This study combines the market information transmission path and the micro mechanism of participant behavior in the Treasury bond futures market with China's financial cycle volatility to explore the mechanism that links futures contract to spot market volatility. The study uses the EGARCH model to describe the wave aggregation effect, as it does not need to limit the positive and negative coefficients of the variance equation. The VAR-GARCH-BEKK model is used to study the volatility spillover effect. Kogan et al. (2009) propose that the influence of base difference on conditional volatility is asymmetric. In this study, the asymmetry of base difference is introduced into the model to analyze the influence of current base differences on market volatility. Indicators such as expected and unexpected trading volume in the Treasury bond market, futures speculation and hedging behavior, and financial cycle fluctuation are constructed. A financial cycle index is synthesized using credit, credit/GDP, real estate price, and M2 year-on-year growth rate. The research sample consists of the main contract of 5-year Treasury bond futures . The bond sample is divided into newly issued deliverable Treasury bond and deliverable Treasury bond with the same yield. The results show that the volatility of China's Treasury bond market is significantly reduced after the introduction of a 5-year Treasury bond futures contract, that is, the futures market has a stabilizing effect. The Treasury bond futures market mitigates the impact of financial cycle volatility on spot market volatility. Through the information channel, the futures market increases the depth of the spot market, reduces the impact of spot trading volume on spot price volatility, and enhances the effect of market information transfer after adjusting for trading mechanisms such as fluctuation limit, margin ratio, and gradient position limit. The positive and negative basis differences have significant asymmetric effects on the fluctuation of bonds, but the positive basis difference is more effective. Among the futures investor behavior, the activity of speculators in Treasury bond futures is directly proportional to the spot volatility, whereas that of hedgers is inversely proportional to spot volatility. The study makes three contributions. First, focusing on the analysis of the micro mechanisms of market volatility, the study explores the path through which the Treasury bond futures market stabilizes the spot market by considering information transitions and different types of participants. Second, the study analyzes the impact of financial cycle risk on the volatility of the Treasury bond spot market. Third, this study explores whether the Treasury bond futures market in China restrains the impact of financial cycle risk on the stability of the spot market, and provides evidence that the Treasury bond futures contract is an effective interest rate risk management tool under financial cycle fluctuation. To stabilize the operation of the Treasury bond market and establish a mechanism for financial market stability mechanism, we should strengthen the supervision of speculative trading in Treasury bond futures, prevent excessive speculation,and enhance futures hedging.
张宗新, 张秀秀. 引入国债期货合约能否发挥现货市场稳定效应？——基于中国金融周期的研究视角[J]. 金融研究, 2019, 468(6): 58-75.
ZHANG Zongxin, ZHANG Xiuxiu. Does the Treasury Bond Futures Contract Stabilize the Treasury Market？ A China's Financial Cycle Perspective. Journal of Financial Research, 2019, 468(6): 58-75.
Albuquerque, B. , and G. Krustev. 2015. “Debt Overhang and Deleveraging in the US Household Sector: Gauging the Impact on Consumption”, Bank of Canada Staff Working Paper, No. 2015~47.
[7]
Bessembinder, H. , and P. J. Seguin. 1993. “Price Volatility, Trading Volume, and Market Depth: Evidence from Futures Markets” ,Journal of Financial and Quantitative Analisis, 28(1): 21～39.
[8]
Bohl, M. T. , and P. M. Stephan. 2013. “Does Futures Speculation Destabilize Spot Prices？ New Evidence for Commodity Markets”, Journal of Agricultural and Applied Economics, 45(4): 595～616.
[9]
Borio, C. 2014. “The Financial Cycle and Macroeconomics: What Have We Learnt？” ,Journal of Banking & Finance, 45, 182～192.
[10]
Choudhry, M. , D. Moskovic, and M. Wong. 2014. Fixed Income Markets: Management, Trading, Hedging, Published by John Wiley & Sons Singapore Pte. Ltd.
[11]
Claessensabc, S. , M. A. Kosea, and M. Terronesa. 2012. “How do Business and Financial Cycles Interact？”, Journal of International Economics, 87(1): 178～190.
[12]
Drehmann, M. , C. Borio, and K. Tsatsaronis. 2012.“Characterising the Financial Cycle: Don't Lose Light of the Medium Term!” ,BIS Working Papers, No. 380.
[13]
Ederngton, L. H. 1979. “The Hedging Performance of the New Futures Markets”, The Journal of Finance, 34(1): 157～170.
[14]
Etienne, X. L. , S. H. Irwin, and P. Garcia. 2015. “Price Explosiveness, Speculation and Grain American” ,Journal of Agricultural Economics, 97(1): 65～87.
[15]
Engle, R. F. , and K. H. Kroner. 1995. “Multivariate Simultaneous Generalized ARCH”, Econometric Theory, 11(1): 122～150.
[16]
Figlewski, S. 1984. “Hedging Performance and Basis Risk in Stock Index Futures” ,The Journal of Finance, 39(3): 657～669.
[17]
Fricke, C. , and L. Menkhoff. 2011. “Does the “Bund” Dominate Price Discovery in Euro Bond Futures Examining Information Share”, Journal of Banking & Finance, 35(5): 1057～1072.
[18]
Garcia, D. 2013. “Sentiment during Recessions” ,The Journal of Finance, 68(3): 1267～1300.
[19]
Irwin, S. H. , and D. R. Sanders. 2012. “Financialization and Structural Change in Commodity Futures Markets”, Journal of Agricultural and Applied Economics, 44(3): 371～396.
[20]
Jacobs, R. L. , and R. A. Jones. 1980. “The Treasury-Bill Futures Market” ,Journal of Political Economy, 88(4): 699～712.
[21]
Johnston, E. T. , W. A. Kracaw, and J. J. Mcconnell. 1991. “Day of the Week Effects in Financial Futures An Analysis of GNMA, T-bond, T-note, and T-bill Contracts”, Journal of Financial and Quantitative Analysis, 26(1): 23～44.
[22]
Joocheol, K. 2005. “An Investigation of the Relationship between Bond Market Volatitiy and Futures”, Applied Economics Letters, 12(11): 657～661.
[23]
Kalantzis, F. G. , and N. T . Milonas. 2013. “Analyzing the Impact of Futures Trading on Spot Price Volatility Evidence from the Spot Electricity Market in France and Germany” ,Energy Economics, 36(10): 454～463.
[24]
Kim, A. 2015. “Futures Speculation Destabilize Commodity Market？”, Journal of Futures Markets, 35(8): 696～714.
[25]
Kogan, L. ,D. Livdan, and A. Yaron. 2009. “Oil Futures Prices in a Production Economy with Investment Constraints”, Journal of Finance, 64(3): 1345～1375.
[26]
Kyle, A. S. 1985. “Continuous Auctions and Insider Tading”, Econometrica, 53(6):1315～1335.
[27]
Laborda, R. ,and J. Olmo. 2014. “Investor Sentiment and Bond Risk Premia” ,Journal of Financial Markets, 18: 206～233.
[28]
Lee, H. T., and J. K. Yoder. 2007. “A Bivariate Markov Regime Switching GARCH Approach to Estimate Time Varying Minimum Variance Hedge Ratios”, Applied Economics, 39(10): 1253～1265.
[29]
Lien, D. and Y. K. Tse. 2002. “Some Recent Developments in Futures Hedging”, Journal of Economic Surveys, 16(3): 357～396.
[30]
Lien, D. , and Y. Li. 2006. “Spot Futures Spread, Time Varying Correlation and Hedging with Currency Futures”, Journal of Futures Markets, 26(1): 1019～1038.
[31]
Li, J. 2011. “Cash Trading and Stock Index Futures Price Volatility”, Journal of Futures Market, 31(5): 465～486.
[32]
Lucia, J. J. , and A. Pardo. 2010. “On Measuring Speculative and Hedging Activities in Futures Markets from Volume and Open Interest Data” ,Applied Economics, 42(12): 1549～1557.
[33]
Mizracha, B. , and C. J. Neelyn. 2008. “Information Shares in the US Treasury Market” ,Journal of Banking & Finance, 32(37): 1221～1233.
[34]
Mclean, R. D. and M. Zhao. 2014. “The Business Cycle, Investor Sentiment, and Costly External Finance”, The Journal of Finance, 69(3): 1377～1409.
[35]
Nelson, D. B. 1991. “Conditional Heterosdasticity in Asset Returns: A New Approach”,Econometrica, 59(2):347～370.
[36]
Pasquariello, P. and C. Vega. 2007. “Informed and Strategic Order Flow in the Bond Markets”,The Review of Financial Studies, 20(6): 1975～2019.
[37]
Pati, P. C. , and P. Rajib. 2011. “Intraday Return Dynamics and Volatility Spillovers between NSE S&P CNX Nifty Stock Index and Stock Index Futures”,Journal Applied Economics Letters, 18(6): 567～574.
[38]
Simpson, W. G., and C. T. Ireland. 1985. “The Impact of Financial Futures on the Cash Market for Treasury Bills”,Journal of Financial and Quantitative Aanlysis, 20(9): 371～379.
[39]
Somanathan, T. V. , and V. A. Nageswaran. 2015. The Economics of Derivatives, Published by Cambridge Books Press.
[40]
Yang, J. , Z. Yang, and Y. Zhou. 2012. “Intraday Price Discovery and Volatility Transmission in Stock Index and Stock Index Futures Markets: Evidence from China”, Journal of Futures Markets, 32(2): 99～121.
[41]
Zhong, M. , A. F. Darrat, and R. Otero. 2004. “Price Discovery and Volatility Spillovers in Index Futures Markets Some Evidence from Mexico” ,Journal of Banking & Finance, 28(12): 3037～3054.
