IDEAS home Printed from https://ideas.repec.org/a/eee/jbfina/v184y2026ics0378426626000075.html

Option introduction, short-sale constraints, and stock price efficiency: New evidence from IPO lockup periods

Author

Listed:
  • Wang, Li

Abstract

We examine whether option availability improves price efficiency of IPO stocks during the lockup periods. Using a difference-in-difference analysis, we show that before September 2008, optioned IPOs exhibit significantly higher price efficiency than non-optioned IPOs during lockup periods across three measures. This efficiency advantage coincides with a regulatory exemption that allowed option market makers (OMMs) to short sell without pre-borrowing shares or complying with “close-out” requirements. After the exemption was eliminated, the efficiency advantage disappears. Additional evidence from Deep-In-the-Money option trading and fail-to-deliver data supports the mechanism that options enhance price efficiency by relaxing short-sale constraints during lockup periods.

Suggested Citation

  • Wang, Li, 2026. "Option introduction, short-sale constraints, and stock price efficiency: New evidence from IPO lockup periods," Journal of Banking & Finance, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:jbfina:v:184:y:2026:i:c:s0378426626000075
    DOI: 10.1016/j.jbankfin.2026.107633
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378426626000075
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbankfin.2026.107633?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:184:y:2026:i:c:s0378426626000075. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.