Abstract: Since the financial crisis from 2007, the Chinese stock market has experienced large volatilities. CSI300 future has received a great deal of attention in recent years for its market stable function, even though it's made to be as a hedge against the risk, price discovery, and market capital allocation tool. After analyzing shortages of existing researches, methods and their applications, the integration of risk measurement process is introduced into the GARCH-M model to measure the volatility of stock market and study the effect of stock index futures on stock market fluctuations. By using the daily data of CSI 300 from August 1st, 2007 to April 23rd, 2015, a highly fitting GARCH-M model is built. The empirical study shows the impact of CSI 300 index future on the stock market volatility after the large external shock. First, there is a positive feedback in the stock market, with different levels of volatility before and after the introduction of stock future and exhibits significant "volatility clustering". Second, the CSI 300 index future has reduced the volatility index of the average 4.45×10^-6 units, played a function as a controller, and eased the stock market volatility to some extent. However, its impact is limited and not fully realized. Finally, the market volatility in China is mainly affected by the old information far more than the new information, while its impact on the conditional variance is durable and has an more important role for the future impact of stock index movements.

Key words: CSI300 futures, stock market volatility, GARCH-M model