Price Discovery Efficiency and Resilience of Financial Futures - A Case Study of Indian Banking Sector

Nivedita Mandal and Rituparna Das

MPRA Paper from University Library of Munich, Germany

Abstract: India has proven to be the second most attractive emerging market among other large emerging economies in world. S&P has predicted India to be the one among fastest growing emerging markets in FY’22. According to Morgan Stanley report, banking is found to be the dominant sector in most of the emerging markets. Hence the banking sector in an emerging economy like India has the potential to attract fresh investment, so as their financial derivatives instruments. In this backdrop, the present work explores the price discovery mechanism between futures and spot markets in particular to Indian banking industry to bring forth sector specific insights. Alongside the paper tries to capture the impact of global slowdown due to Covid-19 pandemic during 2020-21on the Indian banking industry to check for its ‘resilience’ which is always a major concern for any emerging markets. The authors have used Bi-variate VEC-EGARCH framework to examine the price-discovery mechanism in the Bank-Nifty futures and spot markets. The short run impact of Covid-19 shock is measured with help of the ‘market model’ under ‘event study’ methodology.

Keywords: Bank-Nifty, Covid-19, Emerging Markets; Financial Futures; Price Discovery; Resilience, E-GARCH, Granger Causality, VAR, ECM (search for similar items in EconPapers)
JEL-codes: G12 G17 (search for similar items in EconPapers)
Date: 2022-03-12
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