IIMS Journal of Management Science

Impact of Futures Trading on Volatility of CNX Nifty

Gunjan Malhotra¹

First Published 1 Jun 2022. https://doi.org/10.5958/j.0976-030X.3.2.005

Article Information

Volume 3, Issue 2 July-December, 2012

¹Gunjan Malhotra is an assistant professor in the Institute of Management Technology (IMT), Ghaziabad, India. She has actively contributed research articles in various international and national journals and conferences. She is also an editor of a national journal and a reviewer for few international journals. She can be reached at mailforgunjan@gmail.com

Abstract

This paper focuses on the volatile behaviour in the equity market in individual stocks after the introduction of future trading on individual stocks. One of the innovations in financial markets in recent years has been the introduction of derivatives with the introduction of stock index futures. Futures and options play an important role in price discovery, portfolio diversification and hedging. This paper examines the stock market volatility of individual stocks listed on the S&P, CNX Nifty index after the introduction of futures trading. It uses the family of generalised autoregressive conditional heteroscedasticity technique to capture the time-varying nature of volatility and volatility clustering phenomenon in the data. The empirical evidence suggests that in most of the stocks, there is no significant change in the volatility of stock market. But with regard to the information flow to the spot market, future trading has increased volatility.

Keywords

Volatility, Derivatives, CNX Nifty, Futures trading, India

JEL CLASSIFICATION: M

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