- Expiry day, last Thursday impact, derivatives
Abstract
Derivative products are alleged to have a sharp affect on the stock market in various ways ever since their inception in June 2000. Currently, derivative trading constitutes approximately 90% of the total turnover of the NSE (National Stock Exchange). Launching of derivatives and their expiration (last Thursday of every month) in the Indian stock market has been perceived to have direct corollary on the return, volatility, efficiency and marketability of the stock market. This paper tries to analyze empirically the expiration day effect of stock derivatives on underlying securities. This study tests the presence of the last Thursday of the month effect on stock market volatility by using the S&P 500 market index during the period of January 2012 and December 2012 and sample companies which are trading on derivative market. The findings show that the last Thursday of the month effect on stock market volatility is not present in volatility and return equations.