Price discovery in Indian stock index futures market: new evidence based on intraday data
by Sarveshwar Kumar Inani
International Journal of Indian Culture and Business Management (IJICBM), Vol. 14, No. 1, 2017

Abstract: This study revisits price discovery process in Indian stock index futures market for spot and futures of S&P CNX Nifty, by using high-frequency one-minute time-interval data for the period from January 2011 to August 2015 to gain fresh insights. Stationarity and cointegration tests reveal that spot and futures prices are I (1) and cointegrated. Three different econometric methodologies - component share method of Gonzalo and Granger (1995), information share method of Hasbrouck (1995), and modified information share of Lien and Shrestha (2009) have been employed to determine the extent of price discovery contribution by spot and futures markets. The results reveal that futures market is performing its price discovery function which satisfies the transaction cost hypothesis. Also, these results support the notion that futures market is more efficient vis-à-vis spot market in India. Price discovery is a main function of futures market and has implications for asset pricing, portfolio allocation, investment strategy formation, and market efficiency. This study might be helpful for regulators and policymakers to form market structure policies and guidelines for equity markets.

Online publication date: Tue, 06-Dec-2016

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Indian Culture and Business Management (IJICBM):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com