Stock Futures and Volatility Quotient: The Indian Scenario

Sheetal Kapoor

The IUP Journal of Applied Finance, 2014, vol. 20, issue 3, 62-71

Abstract: The last decade of the 20th century in India is said to have witnessed the most innovative phase when derivatives trading incarnated on the stock bourses. Initially, index futures were introduced, followed by stock futures. The onset of derivatives trading, particularly stock futures, has been blamed for distorting the face of market stability, thereby making the market volatile. The present paper aims to find out empirically the impact of stock futures trading on the volatility quotient of the stock market. Though nowadays equity derivative products are available with respect to many equities, the study segregates a few scrips with justified rationale. The scrips, after being tested for symmetry/asymmetry, are operated on GARCH family of models. The empirical results reveal that the overall stock futures’ trading has gone a long way in stabilizing the market and the notion of equity derivatives trading destructing the market stability is a myth.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjaf:v:20:y:2014:i:3:p:62-71

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