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The comovement of option listed stocks

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  • Agyei-Ampomah, Sam
  • Mazouz, Khelifa
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    Abstract

    This study examines the changes in return comovement around the listing and delisting of stock option contracts. We show that newly option listed stocks experience an increase in comovement with a portfolio of option listed stocks and a decrease in comovement with the portfolio of non-optioned stocks. Similarly, stocks that undergo option delisting exhibit a decrease in comovement with option listed stocks and an increase in comovement with non-optioned stocks. We verify the reliability of our findings in several ways. A matched sample analysis suggests that our results are not driven by factors other than option listing and we find similar results using a calendar-time approach. Further analysis reveals that commonalities in option trading may induce the comovement in the option listed stocks. Overall, our evidence is consistent with the predictions of the category or habitat view of comovement.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 35 (2011)
    Issue (Month): 8 (August)
    Pages: 2056-2069

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    Handle: RePEc:eee:jbfina:v:35:y:2011:i:8:p:2056-2069

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Comovement Equity option listing Beta;

    References

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    Cited by:
    1. Martín Saldías, 2012. "Systemic Risk Analysis using Forward-Looking Distance-to-Default Series," Working Papers, Banco de Portugal, Economics and Research Department w201216, Banco de Portugal, Economics and Research Department.

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