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The dynamic relation between short sellers, option traders, and aggregate returns

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  • Delisle, R. Jared
  • Lee, Bong Soo
  • Mauck, Nathan

Abstract

Contrary to existing event studies around option listing introductions, we show short selling and options trading are complements, rather than substitutes. Further, while a plethora of literature demonstrates both short sellers and option traders are informed traders, relatively little is known about which group is relatively more informed. The results of our dynamic tests indicate that options traders are relatively more informed and that short sellers are backward-looking. Our results support the claim that options markets are non-redundant.

Suggested Citation

  • Delisle, R. Jared & Lee, Bong Soo & Mauck, Nathan, 2012. "The dynamic relation between short sellers, option traders, and aggregate returns," MPRA Paper 42566, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42566
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    File URL: https://mpra.ub.uni-muenchen.de/42566/1/MPRA_paper_42566.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Short selling; options market; informed traders;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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