Abstract
High volatility in the stock market is often attributed to index derivative expirations. Such has been the case in the US, Japan, Australia, and, most recently, Hong Kong. Investigations of the US, Japanese, and Australian markets, however, fail to establish a direct link. The empirical evidence indicates that, while trading volume is higher than normal on index futures and option expiration days, stock market volatility is no different. This paper examines price and volume data in days surrounding the expirations of the Hong Kong Futures Exchange's Hang Seng Index (HSI) derivative contracts and finds no evidence of increased stock market volatility.
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