A study on return, volume and volatility relationship in NSE with special reference to selected automobile industries in India

The present study examines the impact of futures trading on contemporaneous and interpersonal relationship between return, volume and volatility in Indian stock market using daily data of closing prices and volume of Nifty index from April 1998 to March 2014. The results of ARMA, GARCH, EGARCH and Granger causality test indicate the presence of information asymmetry, inefficiency and leverage effect in Indian stock market. However, after the introduction of futures the quality of information flowing has improved to the cash market. The inefficiency in market can be attributed to the asymmetric profile of traders in two markets. The results show the introduction of futures trading has significantly altered the structure of return, volume and volatility relationship. Specifically, while there is evidence of more information flowing into spot market following the onset of trading, this new information is assimilated into prices less rapidly than before the onset of trading, leading to an increase in the persistence of volatility.