Impact of Futures and Asymmetric Effect on the Volatility of Indian Stock Market‪.‬

Abstract The purpose of this article is to investigate the effect of the introduction of stock index futures on the volatility of the spot equity market and to test the impact of the introduction of the stock index futures contracts, a GARCH model is modified along the lines of GJR-GARCH and EGARCH model, especially to take into account the link between information and volatility. This paper provides the evidence that there is not much change in the volatility pattern after the introduction of futures in the Indian stock market. The impacts of futures trading for the post futures period can be captured by the asymmetric coefficient (d), suggest that there is a statistically significant and positive asymmetric effect. Thus the introduction of futures trading has impact on the asymmetric coefficient. It shows the similar pattern for the pre and post futures period. Empirical research can be further expanded by selecting and analyzing high frequency intraday data and the inclusion of additional economic variables in the conditional variance equation.