This paper is based on the dissertation of the first author. We thank Prof. Robert Webb, Prof. Paresh Narayan (Deakin University) and the participants at the FEG-JFM Symposium on Financial Econometrics of Derivative Securities and Markets, held at Deakin University, Melbourne during January 10–11, 2013, for their useful suggestions and comments. We also thank an anonymous referee for helpful comments and suggestions. The authors are solely responsible for any remaining errors in the paper.
Expiration-Day Effects and the Impact of Short Trading Breaks on Intraday Volatility: Evidence from the Indian Market
Article first published online: 28 JUN 2013
© 2013 Wiley Periodicals, Inc.
Journal of Futures Markets
Special Issue: Special Issue from the 1st Symposium on the Financial Econometrics of Derivative Securities and Markets
Volume 33, Issue 11, pages 1046–1070, November 2013
How to Cite
Agarwalla, S. K. and Pandey, A. (2013), Expiration-Day Effects and the Impact of Short Trading Breaks on Intraday Volatility: Evidence from the Indian Market. J. Fut. Mark., 33: 1046–1070. doi: 10.1002/fut.21632
- Issue published online: 16 AUG 2013
- Article first published online: 28 JUN 2013
- Manuscript Received: 1 MAY 2013
- Manuscript Accepted: 1 MAY 2013
One distinct feature of the Indian stock market is the large trading volume of single stock futures, which are cash settled on the basis of the volume-weighted average spot prices of the underlying stocks during the last half-an-hour of trading on the expiration day. We investigate the expiration day effect on intraday volatility and find that the volatility of the stocks increases in the last half-an-hour trade on the expiry day but not during the other time intervals. We also investigate the volatility surrounding the intraday trading breaks induced by satellite communication outages, a peculiar feature of the Indian stock market till 2008, and find that the volatility rises when the market reopens after the breaks but not before the breaks. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark