The Impact Of Options Trading On The Market Quality Of The Underlying Security: An Empirical Analysis  

Oleh:

Kumar, Raman ; Sarin, Atulya ; Shastri, Kuldeep

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 53 no. 2 (Apr. 1998), page 717-732.
Topik: the trading market; empirical analysis; security; quality of the market
Fulltext: p 717.pdf (82.77KB)

Isi artikel

We find that option listings are associated with a decrease in the variance of the pricing error, a decrease in the adverse selection component of the spread, and an increase in the relative weight placed by the specialist on public information in revising prices for the underlying stocks. We also find that there is a decrease in the spread and increases in quoted depth, trading volume, trading frequency, and transaction size after option listings. Overall, our results suggest that option listings improve the market quality of the underlying stocks.

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