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Contract size changes in the options market: effects on market efficiency and investor behaviour

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  • Seongkyu Gilbert Park
  • Doojin Ryu

Abstract

We study options market participants’ trading behaviour before and after the options multiplier increases. After the options multiplier increases, the options market becomes more efficient. By analysing the high-frequency microstructure dataset, we show that local retail and local institutional investors who trade in both options and futures markets trade more after the change in the multiplier. Our results imply that the increase in the market efficiency may be caused by fewer speculators. In addition, lottery stocks are traded more actively after the options multiplier increase.

Suggested Citation

  • Seongkyu Gilbert Park & Doojin Ryu, 2021. "Contract size changes in the options market: effects on market efficiency and investor behaviour," Applied Economics, Taylor & Francis Journals, vol. 53(57), pages 6670-6682, December.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:57:p:6670-6682
    DOI: 10.1080/00036846.2021.1948962
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    Cited by:

    1. Xingguo Luo & Wenye Cai & Doojin Ryu, 2022. "Information contents of intraday SSE 50 ETF options trades," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(4), pages 580-604, April.
    2. Joonhyuk Song & Doojin Ryu & Jinyoung Yu, 2023. "Changes in the options contract size and arbitrage opportunities," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(1), pages 122-137, January.

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