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Expiration day effects of stock and index futures on the Warsaw Stock Exchange

Author

Listed:
  • Milena Suliga

    (AGH University of Science and Technology in Krakow, Faculty of Management, Department of Applications of Mathematics in Economics)

  • Tomasz Wójtowicz

    (AGH University of Science and Technology in Krakow, Faculty of Management, Department of Applications of Mathematics in Economics)

Abstract

This paper examines the impact of stock and index futures expirations on the spot market on the Warsaw Stock Exchange. Three of the most commonly-observed effects are analysed, namely increased trading volume of the underlying asset, abnormally high volatility of returns on the expiration day and a price reversal after the expiration. The study confirms that index futures expirations induce increased trading activity of investors, reflected in abnormally high turnover and relative turnover values of stocks from the index. In the case of single stocks, however, all three effects are observed. The reversal of stock prices takes place just after futures expiration and is reflected in the opening prices on the next trading session. Additional analysis performed in sub-periods reveals a significant impact of changes in the short selling rules introduced in May 2015 on expiration day effects.

Suggested Citation

  • Milena Suliga & Tomasz Wójtowicz, 2019. "Expiration day effects of stock and index futures on the Warsaw Stock Exchange," Bank i Kredyt, Narodowy Bank Polski, vol. 50(1), pages 45-82.
    • Handle: RePEc:nbp:nbpbik:v:50:y:2019:i:1:p:45-82
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    More about this item

    Keywords

    futures market; expiration day effects; stock market; event study;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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