The Impact of Derivatives on Stock Market Volatility: A Study of the Nifty Index
This paper studies the volatility implications of the introduction of derivatives on stock market volatility in India using the S&P CNX Nifty Index as a benchmark. To account for non-constant error variance in the return series, a GARCH model is fitted by incorporating futures and options dummy variables in the conditional variance equation. We find clustering and persistence of volatility before and after derivatives, while listing seems to have no stabilisation or destabilisation effects on market volatility. The post-derivatives period shows that the sensitivity of the index returns to market returns and any day-of-the-week effects have disappeared. That is, the nature of the volatility patterns has altered during the post-derivatives period.
Volume (Year): 4 (2008)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://web.usm.my/aamj/|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:usm:journl:aamjaf00402_42-66. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journal Division)
If references are entirely missing, you can add them using this form.