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The Impact of Single Stock Futures on Market Efficiency and Volatility: A Dynamic CAPM Approach

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  • Imran Riaz Malik
  • Attaullah Shah

Abstract

The concerns regarding regulations of futures markets and their destabilizing ability are unresolved in both developed and developing markets. Following stringent regulations of single stock futures (SSFs) for resumption episode after financial crises, this study addresses this concern and investigates the destabilizing impact of SSFs on the underlying stocks in an emerging economy using data of companies listed in the Karachi Stock Exchange between 1999 and 2008. Specifically, the study explores whether SSFs have caused a simultaneous increase in the volatility and operational efficiency of their underlying spot market counterparts. The results reported in the study show that the introduction of SSFs has no significant impact on market efficiency and volatility of SSFs underlying stocks and non-SSFs stocks. The results affirm that SSFs have, at least, no destabilizing impact on the underlying stocks.

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  • Imran Riaz Malik & Attaullah Shah, 2017. "The Impact of Single Stock Futures on Market Efficiency and Volatility: A Dynamic CAPM Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(2), pages 339-356, February.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:2:p:339-356
    DOI: 10.1080/1540496X.2016.1210507
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    Cited by:

    1. Khan, Naimat U. & Shah Jehan, Qurat Ul Ain & Shah, Attaullah, 2017. "Impact of taxation on dividend policy: Evidence from Pakistan," Research in International Business and Finance, Elsevier, vol. 42(C), pages 365-375.

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