Short-sales Constraint, Stock Index Futures and Chinese Security Market Completeness

Complete market is the target of all the financial deepening, reform and innovations. But Chinese security market is in complete under short-sale constraint, which causes the ineffectiveness of risk share and the loss of social welfare. We have proved that the market will become more complete with the stock index futures being introduced into the short-sale constrained market. This suggests that the introduction of stock index futures can enhance the completeness and risk sharing function of the Chinese short-sale constrained market.