Author

  • Sathya Swaroop Debasish

    • Reader, P.G.Department of Business Administration Utkal University, Vani Vihar, Bhubaneswar-4, Orissa, India
    • India

Abstract

This study attempts to examine whether potential expiration effects exist on the NSE Nifty index by comparing the trading volume and return process at expiration with a comparison group. The period of analysis covers index futures expirations from June 2001 to May 2009. The trading volume and return process on expiration days and during expiration weeks were compared with a set of comparison days and comparison weeks. The current study used the pooled t -test and Wilcoxon rank sum test to investigate whether mean returns, price ranges, and adjusted trading volumes (i.e. time-independent trading volumes) were significantly different at expiration. The procedure as used by Stoll and Whaley (1987) was used to examine if price reversals existed during expiration days and comparison days.The evidence indicates that the trading volume on expiration days and in expiration weeks was significantly larger than on comparison days and during comparison weeks. Further, the results suggest that there were no price distortions on the expiration day or during the expiration week for the complete sample period and the second sub-period. For the first sub-period, however, evidence suggesting that expiration days and weeks experienced higher volatility than normal does exist. No evidence of significantly different mean returns, volatility, or price reversals at expiration was found. This could be due to the longer settlement period in India. However, when the complete sample period was divided into two sub-periods it was found that expiration day (weeks) during the first sub period may have experienced price distortions. The results of this study are crucial to investors, stock exchange officials, and regulators.

Keywords

References

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How to Cite

Debasish, S. S. (2010). Investigating Expiration Day Effects in Stock Index Futures in India. Journal of Economics and Behavioral Studies, 1(1), 9-19. https://doi.org/10.22610/jebs.v1i1.210

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Section

Research Paper

Published in

Vol. 1 No. 1 (2010) Crisis, Markets & Human Behaviour View issue contents

Published

2010-12-15

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