Derived signals for S & P CNX nifty index futures

Financial Innovation

Table 6 Second stage V-IGARCH(1,1) regression model (Equation 5)

Note:* (**) Significant at 0.01 (<0.01) level. The second stage V-IGARCH(1,1) estimation considers NSE daily data from December 02, 2002, to November 30, 2004. Mean and conditional variance equations are,
\( {C}_t={\hat{\gamma}}_{03}+{\hat{\gamma}}_{13}\triangle {\hat{u}}_{t-1}+{\hat{\gamma}}_{23}\triangle {\hat{u}}_{t-2}+{\hat{\gamma}}_{33}\triangle {w}_{t-1}+{\hat{\gamma}}_{43}{T}_{pt}+{\hat{\gamma}}_{53}\sum_{i=1}^3{D}_i+{\varepsilon}_{ct} \)
\( {h}_{3t}={\hat{\delta}}_{03}+{\hat{\delta}}_{13}{\hat{\varepsilon}}_{ct-1}^2+{\hat{\delta}}_{23}{h}_{1t-1}+{\hat{\delta}}_{33}\triangle {w}_{t-1}^2 \)
where, C _t = total money supply, T _pt = trading prices, and D _i = dummy variables = time of submission of limit orders. Dummy D ₁ is the initial period of th e Nifty trading, D ₂ is in between the initial and the last periods of trading, and D ₃ is the last period of the Nifty trading. \( \triangle {\hat{u}}_{t-1} \), \( \triangle {\hat{u}}_{t-2} \), ∆w _t − 1, and \( \triangle {w}_{t-1}^2 \) = first and second differenced residuals and first differenced credit availability dummy values are derived from the first stage V-IGARCH (1, 1) estimation. This result indicates that impact costs are higher in the entire trading time-period (trading hours from 09:55 IST to15:30 IST) of submission of limit orders and hence reduction effects on returns exist