101 Delhi Business Review X Vol. 12, No. 1 (January - June 2011) DETERMINING THE INFORMA DETERMINING THE INFORMA DETERMINING THE INFORMA DETERMINING THE INFORMA DETERMINING THE INFORMATIO TIO TIO TIO TION CO N CO N CO N CO N CONTENT OF NTENT OF NTENT OF NTENT OF NTENT OF FUTURES MARKET VARIABLES IN INDIA FUTURES MARKET VARIABLES IN INDIA FUTURES MARKET VARIABLES IN INDIA FUTURES MARKET VARIABLES IN INDIA FUTURES MARKET VARIABLES IN INDIA A TIME SERIES APPRO A TIME SERIES APPRO A TIME SERIES APPRO A TIME SERIES APPRO A TIME SERIES APPROACH CH CH CH CH Malabika Deo* Malabika Deo* Malabika Deo* Malabika Deo* Malabika Deo* K. Srinivasan** K. Srinivasan** K. Srinivasan** K. Srinivasan** K. Srinivasan** N this paper the causal nexus between futures return, trading volume, open interest and volatility for S&P CNX Nifty futures markets were analyzed for the period from January 1, 2002 to September 30, 2009. In view of the priority given to dynamic relationship in conducting this study, the Johansen-Juselius Multivariate cointegration, Vector Error Correction Model (VECM), Impulse Response Function (IRF) and Variance Decomposition (VDC), are used as empirical evidence. Our result reveals, that the causal linkage of return are influenced by all the other variables, whereas the ECTs coefficients are negative and significant in the long-run but their values are too high to be in equilibrium. We conclude that, any deviation from the equilibrium Cointegrating relationships, as measured by the ECTs, is mainly caused by changes in returns and volatility. In the case of IRF appears to be broadly consistent with earlier VECM results trading volume, open interest and volatility remain consistent over the period, whereas the fluctuation in futures return was mainly determined by the other future market variables. Finally, there exist a bi-directional causal relationship between futures market variables in the short-run and unidirectional causality running from trading volume and open interest with return and volatility bears the brunt of short-run adjustment to long-run equilibrium. Key Words: Futures Market Variables, Volatility, Information Content, Cointegration, VECM. Introduction Financial media regularly reports daily trading activities of the stock markets. The information content of this data has long attracted the attention of many researchers, policy makers, and investors to examine if there is an asymmetric relationship between these variables. However, trading volume offers useful information for practitioners and investors in investment decisions, as well as for researchers and policy makers in testing the theories of financial economics. The contemporaneous relation between price movements, trading volume and open interest on financial markets has long attracted the attention of many financial economists. Our initial analysis centers on the volume and price change relationship that they are positively related to each other and it was first documented by Ying (1966). Similarly, Karpoff (1987) seminal paper summarizes the importance of this research area by presenting the following argument. First, the returns or trading volume relation provides insight into the structure of financial markets. Second, the returns or trading volume relation is important for event studies that use a combination of stock returns and trading volume data to draw inferences. Third, the returns or trading volume relation is critical to the debate over the empirical distribution of speculative prices. A considerable amount of empirical research has been directed towards examining the relationship between futures and the underlying spot prices. In particular, the focus of attention has been on the I * Professor and Head of Commerce, Pondicherry University, Puducherry, India. ** Assistant Professor, Department of Management Studies, Christ University, Bangalore, India.