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Price Discovery and Volatility Spillover Between Spot and Futures Markets: Evidence from India

Listed author(s):
  • P Sakthivel
  • B Kamaiah
Registered author(s):

    The present study investigates the role of information in price discovery function and volatility spillover in Nifty and S&P CNX Nifty futures by employing two-step TGARCH procedures. First, the study examines short and long-run relationship between S&P CNX Nifty index and Nifty index futures in near month, next month and far month prices by employing Engle-Granger cointegration and error correction model. The results of cointegration test show that there is long-run equilibrium relationship between spot and futures markets, and the spot market tends to make adjustments to re-establish the equilibrium during the next period. The results of TGARCH model reveal a bidirectional volatility spillover between spot and near, middle and far month futures.

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    Article provided by IUP Publications in its journal The IUP Journal of Applied Economics.

    Volume (Year): IX (2010)
    Issue (Month): 2 (April)
    Pages: 81-97

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    Handle: RePEc:icf:icfjae:v:09:y:2010:i:2:p:81-97
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