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The Interrelation of Stock and Options Market Trading-Volume Data

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  • Anthony, Joseph H
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    Abstract

    This research empirically investigates the relation between common stock and call option trading volumes. The p aper hypothesizes and tests a sequential flow of information between the stock and option markets. If information trading for Chicago Boar d Option Exchange listed firms is predominantly accomplished through option trading, then existing research methodologies may be biased ag ainst finding any significant economic consequences in those instance s where option listing is an impor-tant variable. Results indicate th at trading in call options leads trading in the underlying shares, wi th a one day lag. Copyright 1988 by American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal Journal of Finance.

    Volume (Year): 43 (1988)
    Issue (Month): 4 (September)
    Pages: 949-64

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    Handle: RePEc:bla:jfinan:v:43:y:1988:i:4:p:949-64

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    Cited by:
    1. Hao, Xiaoting & Lee, Eunju & Piqueira, Natalia, 2013. "Short sales and put options: Where is the bad news first traded?," Journal of Financial Markets, Elsevier, vol. 16(2), pages 308-330.
    2. Johnson, Travis L. & So, Eric C., 2012. "The option to stock volume ratio and future returns," Journal of Financial Economics, Elsevier, vol. 106(2), pages 262-286.
    3. Michael Boluch & Trevor Chamberlain, 1997. "Option volume and stock price behavior: Some evidence from the Chicago board options exchange," Atlantic Economic Journal, International Atlantic Economic Society, vol. 25(4), pages 358-370, December.
    4. Engle, Robert F, 1999. "Modeling the Impacts of Market Activity on Bid-Ask Spreads in the Option Market," University of California at San Diego, Economics Working Paper Series qt6rp7g17q, Department of Economics, UC San Diego.
    5. Shang-Jin Wei & Jungshik Kim, 1997. "The Big Players in the Foreign Exchange Market: Do They Trade on Information or Noise?," NBER Working Papers 6256, National Bureau of Economic Research, Inc.
    6. Atilgan, Yigit, 2014. "Volatility spreads and earnings announcement returns," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 205-215.
    7. Nam, Seung Oh & Oh, SeungYoung & Kim, Hyun Kyung & Kim, Byung Chun, 2006. "An empirical analysis of the price discovery and the pricing bias in the KOSPI 200 stock index derivatives markets," International Review of Financial Analysis, Elsevier, vol. 15(4-5), pages 398-414.
    8. Rafiqul Bhuyan, 2002. "Information, Alternative Markets, and Security Price Processes: A Survey of Literature," Finance 0211002, EconWPA.
    9. Benjamin Blau & Chip Wade, 2013. "Comparing the information in short sales and put options," Review of Quantitative Finance and Accounting, Springer, vol. 41(3), pages 567-583, October.
    10. Chan, Kam C. & Chang, Yuanchen & Lung, Peter P., 2009. "Informed trading under different market conditions and moneyness: Evidence from TXO options," Pacific-Basin Finance Journal, Elsevier, vol. 17(2), pages 189-208, April.
    11. Li, Ming-Yuan Leon, 2008. "Clarifying the dynamics of the relationship between option and stock markets using the threshold vector error correction model," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(3), pages 511-520.
    12. Hayunga, Darren K. & Holowczak, Richard D. & Lung, Peter P. & Nishikawa, Takeshi, 2012. "Derivatives traders’ reaction to mispricing in the underlying equity," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2438-2454.
    13. Chen, Carl R. & Lung, Peter P. & Tay, Nicholas S. P., 2005. "Information flow between the stock and option markets: Where do informed traders trade?," Review of Financial Economics, Elsevier, vol. 14(1), pages 1-23.
    14. Muravyev, Dmitriy & Pearson, Neil D. & Paul Broussard, John, 2013. "Is there price discovery in equity options?," Journal of Financial Economics, Elsevier, vol. 107(2), pages 259-283.
    15. Nam, Seung Oh & Oh, SeungYoung & Kim, Hyun Kyung, 2008. "The time difference effect of a measurement unit in the lead-lag relationship analysis of Korean financial market," International Review of Financial Analysis, Elsevier, vol. 17(2), pages 259-273.
    16. P. L. Varson & M. J. P. Selby, 1997. "Option prices as predictors of stock prices: intraday adjustments to information releases," The European Journal of Finance, Taylor & Francis Journals, vol. 3(1), pages 49-72.
    17. Byeong-Je An & Andrew Ang & Turan G. Bali & Nusret Cakici, 2013. "The Joint Cross Section of Stocks and Options," NBER Working Papers 19590, National Bureau of Economic Research, Inc.
    18. Hu, Jianfeng, 2014. "Does option trading convey stock price information?," Journal of Financial Economics, Elsevier, vol. 111(3), pages 625-645.

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