Do Expirations of Hang Seng Index Derivatives Affect Stock Market Volatility?
Pacific Basin Finance Journal 7, p.453-470, 1999

Nicolas P.B. Bollen and Robert E. Whaley

High volatility in the stock market is often attributed to index futures and option expirations. Such has been the case in the U.S., Japan, Australia, and, most recently, Hong Kong. Investigations of the U.S., Japanese, and Australian markets, however, fail to establish a direct link. While trading volume is documented to be abnormally high on index futures and option expiration days, stock market volatility appears to be no different than on other trading days. This paper investigates the volatility surrounding the monthly expirations of the Hong Kong Futures Exchange's Hang Seng Index futures and option contracts. We find no evidence to support the hypothesis that the expiration of index derivatives affects stock market volatility.