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A Study of Expiration-day Effects of Index Derivatives Trading in India

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  • Rachna Mahalwala

Abstract

This study examines the existence of expiration-day effects of index derivatives trading in India through volume, return, volatility, and price reversal characteristics of underlying stock market during expiration days of these contracts. Expiration-day effects can be a result of a mixture of factors, including the presence of arbitrage opportunities, the cash settlement nature of index derivative contracts, the stock market process for accommodating the unwinding of arbitrage positions in the stocks, and the efforts to wittingly manipulate prices. Using daily price and turnover data of CNX Nifty and employing time series “ARMA model with EGARCH errors,†the results of the study indicated the presence of some significant but non-disastrous expiration-day effects in India.

Suggested Citation

  • Rachna Mahalwala, 2016. "A Study of Expiration-day Effects of Index Derivatives Trading in India," Metamorphosis: A Journal of Management Research, , vol. 15(1), pages 10-19, June.
    • Handle: RePEc:sae:metjou:v:15:y:2016:i:1:p:10-19
    DOI: 10.1177/0972622516629029
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    References listed on IDEAS

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    1. Henryk Gurgul & Milena Suliga, 2020. "Impact of futures expiration on underlying stocks: intraday analysis for Warsaw Stock Exchange," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 28(3), pages 869-904, September.
    2. Chhabra, Damini & Gupta, Mohit, 2022. "Calendar anomalies in commodity markets for natural resources: Evidence from India," Resources Policy, Elsevier, vol. 79(C).

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