Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9553869 | Journal of Banking & Finance | 2005 | 26 Pages |
Abstract
This paper proposes and tests a new hypothesis concerning the price impact of option introductions on the underlying asset. We argue that the leverage properties of options induce a higher level of informed trading in the aggregate market (underlying plus derivative), resulting in excess listing-day price movements in the newly optioned equity. Using an alternative dataset, our results suggest that this may be an explanation for the observed positive than negative excess listing-day returns of US optioned stocks over the past thirty years.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Robert Faff, David Hillier,