Liquidity Effects of Single Stock Futures

American Journal of Scientific Research, ISSN 2301-2005, Issue 80 November, 2012, pp. 79-91

13 Pages Posted: 9 Dec 2012

See all articles by Muhammad Siddiqi

Muhammad Siddiqi

University of Agriculture, Peshawar

Muhammad Nouman

University of Agriculture, Peshawar

Safiullah Khan

Kohat University of Science & Technology, Kohat, Pakistan.

Faisal Khan

University of Peshawar

Date Written: 2012

Abstract

This study aims to analyse the impact of Single Stock Futures (SSF) on liquidity of the stocks for which SSF was introduced in Karachi Stock Exchange (KSE). A sample of 21 companies is selected from different industrial sectors. Data related to daily stock trading for these companies are taken for two-year pre and two-year post SSFs introduction period. Four variables namely Volume, Trading value, Number of Trades, and value per trade are used as proxies for liquidity of the sample stocks. The Hotelling's T squared test is used for the hypothesis testing, while data is analyzed using the paired difference test for two population means. Results of the Hotelling’s T squared test indicate that the introduction of stock futures trading has significantly affected liquidity of the stocks dealing in Single Stock Futures. Results of the paired difference test indicate that the trading volume, the number of trades, and the trading value for most the underlying stocks is positively and significantly affected, while impact on value per trade for most of the sample stocks is insignificant. Thus, it is concluded that liquidity of the stocks has increased with the introduction of the SSF in the Pakistan’s market.

Keywords: Single Stock Futures, Liquidity, Karachi Stock Exchange, Hotelling’s T squared

Suggested Citation

Siddiqi, Muhammad and Nouman, Muhammad and Khan, Safiullah and Khan, Faisal, Liquidity Effects of Single Stock Futures (2012). American Journal of Scientific Research, ISSN 2301-2005, Issue 80 November, 2012, pp. 79-91, Available at SSRN: https://ssrn.com/abstract=2186856

Muhammad Siddiqi

University of Agriculture, Peshawar ( email )

Peshawar
Peshawar, Khyber Pakhtun Khwa 25000
Pakistan

Muhammad Nouman (Contact Author)

University of Agriculture, Peshawar ( email )

Peshawar
Peshawar, Khyber Pakhtun Khwa 25000
Pakistan

Safiullah Khan

Kohat University of Science & Technology, Kohat, Pakistan. ( email )

Kohat
Kohat
Pakistan

Faisal Khan

University of Peshawar ( email )

Quaid-E-Azam College of Commerce
Peshawar, PA Khyber Pukhtoon Khwa 25125
Pakistan

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