EconPapers    
Economics at your fingertips  
 

Price discovery in Indian stock index futures market: new evidence based on intraday data

Sarveshwar Kumar Inani

International Journal of Indian Culture and Business Management, 2017, vol. 14, issue 1, 23-43

Abstract: This study revisits price discovery process in Indian stock index futures market for spot and futures of S%P CNX Nifty, by using high-frequency one-minute time-interval data for the period from January 2011 to August 2015 to gain fresh insights. Stationarity and cointegration tests reveal that spot and futures prices are I (1) and cointegrated. Three different econometric methodologies - component share method of Gonzalo and Granger (1995), information share method of Hasbrouck (1995), and modified information share of Lien and Shrestha (2009) have been employed to determine the extent of price discovery contribution by spot and futures markets. The results reveal that futures market is performing its price discovery function which satisfies the transaction cost hypothesis. Also, these results support the notion that futures market is more efficient vis-à-vis spot market in India. Price discovery is a main function of futures market and has implications for asset pricing, portfolio allocation, investment strategy formation, and market efficiency. This study might be helpful for regulators and policymakers to form market structure policies and guidelines for equity markets.

Keywords: price discovery; vector error correction model; VECM; Johansen cointegration; component share; modified information share; common factor methods; futures markets; India; intraday data; econometrics; spot markets; transaction cost theory; asset pricing; portfolio allocation; investment strategy; market efficiency. (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.inderscience.com/link.php?id=80758 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijicbm:v:14:y:2017:i:1:p:23-43

Access Statistics for this article

More articles in International Journal of Indian Culture and Business Management from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Carmel O'Grady ( this e-mail address is bad, please contact ).

 
Page updated 2020-09-19
Handle: RePEc:ids:ijicbm:v:14:y:2017:i:1:p:23-43