Effect of Stock Index Futures Trading on Volatility and Performance of Underlying Market: The case of India
Keywords:
Stock Index Futures, Volatility, GARCH (1,1) model, National Stock ExchangeAbstract
The study pertains to analyse the effect of stock index futures trading on volatility and performance of underlying market. The four stock index futures of National Stock Exchange (NSE) are selected for the study. The study used GARCH (1,1) model to test the effect of futures trading. Overall the study found that the introduction of stock index futures doesn’t have a significant effect on the performance of all the selected underlying stock indices but there is a significant difference in volatility of all the selected underlying market before and after introduction of stock index futures.
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