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The Effect of Option Trading at the DTB on the Underlying Stocks' Return Variance

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Author Info

  • Heer, Burkhard
  • Trede, Mark
  • Wahrenburg, Mark

Abstract

The effects of option trading at the DTB on the variance of the underlying stocks are examined. We use a new distribution free test being based on the empirical distribution functions. The evidence indicates that stock return variance increased after the introduction of the DTB. This effect can be partly explained by the strong increase in trading volume for option listed stocks. Our results stand in stark contrast to prior studies of both American and European financial markets.

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 22 (1997)
Issue (Month): 2 ()
Pages: 233-45

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Handle: RePEc:spr:empeco:v:22:y:1997:i:2:p:233-45

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Cited by:
  1. Sabrina Ecca & Michele Marchesi & Alessio Setzu, 2008. "Modeling and Simulation of an Artificial Stock Option Market," Computational Economics, Society for Computational Economics, vol. 32(1), pages 37-53, September.

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