Empirical Evidence of the Causative Association Between Spot, Futures and Options Market : An ARDL Model Approach
Purpose: The purpose of this paper is to explore and provide evidence about the nature of short run causal relationship as well as the speed of adjustment towards long run equilibrium between cash and FAO markets in India as represented by National Stock Exchange. The study uses individual stocks for studying the underlying relationship.Design/Methodology: The paper makes use of the auto regressive distributed lag model to study the causal relationship between spot, futures and options markets. The study makes use of the 15-minute interval trades data for the purpose of analysis.Findings: The ARDL model shows a long run relationship between spot, futures and options (both call and put) prices but we do not have sufficient statistical evidence to conclude the short run causal association between the variable except for call and put options.Practical Implications: The results indicate that derivative markets are not leading the spot market but spot market contributes towards price discovery in the FAO markets. Potential investors can take their positions and design their portfolio in the cash and FAO segments using the insights provided by this piece of work.Originality/Value: This paper is an original piece of work towards evidencing the causative association between spot, futures and options markets using individual securities. Matters pertaining to price discovery process in Indian financial markets are issues of interest for financial thinkers, traders, investors and financial analysts
Year of publication: |
2020
|
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Authors: | Jain, Vaishali ; Dahigude, Rahul ; Divekar, Dr. Rajiv |
Publisher: |
[S.l.] : SSRN |
Saved in:
freely available
Extent: | 1 Online-Ressource (18 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 5, 2020 erstellt |
Other identifiers: | 10.2139/ssrn.3743379 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014031292
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