Impact of stock options and futures on volatility and informational effeciency in Indian market - An emperical study

This studies examines the impact of introduction of stock options and futures contracts on the volatility and informational efficiency of underlying stocks. In line with the finding of studies in context of many other countries, the results show an overwhelming evidence of decline in volatility after the introduction of these securities in Indian stock market. We do not find any significant change in the autocorrelation structure of return series between pre-introduction and post-introduction period which indicates that there is no significant impact on the informational effeciency of underlying stocks. Finally, the cionclusions provide rationale for introduction of futures and options contracts on more stocks as it contributes to enhancing the efficiency of underlying stock market.