Expiration-day effects and the impact of short trading breaks on intraday volatility: evidence from the Indian market

Abstract

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