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The impact of soft intervention on the Chinese financial futures market
Author(s) -
Hilliard Jimmy E.,
Zhang Haoran
Publication year - 2020
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.22076
Subject(s) - futures contract , intervention (counseling) , commission , forward market , futures market , china , business , order (exchange) , financial crisis , financial market , spot market , finance , financial economics , economics , psychology , psychiatry , political science , law , macroeconomics , electricity , electrical engineering , engineering
During the 2015 financial crisis in China, participants faced the criticism that manipulators and shorts had destabilized the market. As a result, the Chinese Securities Regulatory Commission intervened sequentially in the spot market and then in the futures market. Trading volume dropped precipitously. Using the cost‐of‐carry model, we find that these actions significantly impacted equilibrium pricing. Following intervention in the spot market, mispricing was attenuated but remained significant after further intervention in the futures market. We use the Hong Kong market and a difference‐in‐differences statistic to address the role of the China Securities Regulatory Commission soft intervention versus intervention by hard rules.