Impact of derivatives trading on emerging stock markets: some evidence from India

Sumon Bhaumik, Suchismita Bose

Research output: Contribution to journalArticle

Abstract

It is generally accepted that the introduction of financial derivatives that facilitate hedging is an important step in the development of stock markets. However, financial derivatives can potentially increase volatility in the underlying cash market, which might be detrimental to the development of the stock market itself. Using data from India, we examine one possible route through which derivatives trading can increase cash market volatility: expiration day effect. Our results indicate that expiration of equity derivatives contracts does not have any effect on the intra-day volatility of the market index, and it reduces the volatility of inter-day returns to the index.
Original languageEnglish
Pages (from-to)118-137
Number of pages20
JournalComparative Economic Studies
Volume51
Issue number1
DOIs
Publication statusPublished - Mar 2009

Fingerprint Dive into the research topics of 'Impact of derivatives trading on emerging stock markets: some evidence from India'. Together they form a unique fingerprint.

  • Cite this