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Investigating the Price Discovery Efficiency of Indian Equity Futures Market

Author

Listed:
  • Kapil Gupta
  • Balwinder Singh

Abstract

Price discovery and risk transfer (i.e. hedging) have been considered as the pivot functions of the futures market. A market is said to be weak form efficient if the current market price and past price are uncorrelated (i.e. the asset price movements are random). A market is known as semi-strong efficient, if it absorbs and reflects the market information as well as the public information (viz., corporate actions, political announcement, etc.). Strong form efficient market is one which neglects the chances of even insiders to make abnormal profits on the basis of first hand information. Efficient price discovery in the futures market has many advantages for the traders as well as for the regulators. The current study is an attempt to investigate whether Indian equity futures market is efficient and to study whether it provides any significant information during the high-volatility period.

Suggested Citation

  • Kapil Gupta & Balwinder Singh, 2006. "Investigating the Price Discovery Efficiency of Indian Equity Futures Market," Paradigm, , vol. 10(2), pages 33-45, July.
    • Handle: RePEc:sae:padigm:v:10:y:2006:i:2:p:33-45
    DOI: 10.1177/0971890720060206
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    Cited by:

    1. Gurmeet Singh, 2017. "Estimating Optimal Hedge Ratio and Hedging Effectiveness in the NSE Index Futures," Jindal Journal of Business Research, , vol. 6(2), pages 108-131, December.

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