IDEAS home Printed from https://ideas.repec.org/a/eme/jrfpps/15265940910924508.html
   My bibliography  Save this article

Effect of futures trading on spot‐price volatility: evidence for NSE Nifty using GARCH

Author

Listed:
  • Sathya Swaroop Debasish

Abstract

Purpose - The paper aims to study the impact of the introduction of Nifty index futures on the volatility of the Indian spot markets by use of econometric models. Design/methodology/approach - The study considered six measures of volatility, the dynamic linear regression model, and the GARCH models to investigate volatility in National Stock Exchange (NSE) Nifty prices both before and after the onset of futures trading. Findings - The GARCH analysis confirmed no structural change after the introduction of futures trading on Nifty, and found that whilst the pre‐futures sample was integrated, the post‐futures sample was stationary. Spot returns volatility is found to be less important in explaining spot returns after the advent of futures trading in NSE Nifty. Practical implications - The results imply that futures markets serve their prescribed role of improving pricing efficiency and improve the quality of information flowing to spot markets. This will enable investors to prudently structure their strategies investing in both spot and futures markets. Originality/value - This study is an original piece of work towards exploring the impact of the introduction of futures trading on cash market volatility in an emerging economy like India.

Suggested Citation

  • Sathya Swaroop Debasish, 2009. "Effect of futures trading on spot‐price volatility: evidence for NSE Nifty using GARCH," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 10(1), pages 67-77, January.
    • Handle: RePEc:eme:jrfpps:15265940910924508
    DOI: 10.1108/15265940910924508
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/15265940910924508/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/15265940910924508/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/15265940910924508?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Avinash & T. Mallikarjunappa, 2024. "Do Spot, Futures, and Options Markets Exhibit Price and Volatility Interdependence? Evidence from India," Jindal Journal of Business Research, , vol. 13(1), pages 100-117, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jrfpps:15265940910924508. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.