The Prediction for Index Futures Returns and the Relational Analysis of Spillover Effect

The grey theory is mainly uncertainty directed against the systematic model and fit for incomplete information. This paper adopts the grey prediction methods, GM(1,1) and GM(1,1|optimal α), to investigate the return and volatility of major index futures among American and Eurasian markets. The grey relational theory and GM(1,N) model are further used to observe the volatility spillover effect and find the main influence factor in the volatility relatedness about the rate of returns of index futures. In terms of the prediction error, it is exhibited that GM(1,1) is not good for prediction. It also reveals by GM(1,N) that the rate of daily return of Dow Jones is the main influence factor on other index futures rate of returns. In conclusion, the American market firmly dominates global stock markets and forward markets.