IDEAS home Printed from https://ideas.repec.org/a/eee/jbfina/v29y2005i6p1359-1384.html
   My bibliography  Save this article

Complete markets, informed trading and equity option introductions

Author

Listed:
  • Faff, Robert
  • Hillier, David

Abstract

No abstract is available for this item.

Suggested Citation

  • Faff, Robert & Hillier, David, 2005. "Complete markets, informed trading and equity option introductions," Journal of Banking & Finance, Elsevier, vol. 29(6), pages 1359-1384, June.
    • Handle: RePEc:eee:jbfina:v:29:y:2005:i:6:p:1359-1384
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378-4266(04)00127-X
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. repec:bla:jfinan:v:53:y:1998:i:5:p:1623-1656 is not listed on IDEAS
    2. Miller, Edward M, 1977. "Risk, Uncertainty, and Divergence of Opinion," Journal of Finance, American Finance Association, vol. 32(4), pages 1151-1168, September.
    3. Brennan, Michael J. & Subrahmanyam, Avanidhar, 1996. "Market microstructure and asset pricing: On the compensation for illiquidity in stock returns," Journal of Financial Economics, Elsevier, vol. 41(3), pages 441-464, July.
    4. Detemple, Jerome B & Selden, Larry, 1991. "A General Equilibrium Analysis of Option and Stock Market Interactions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(2), pages 279-303, May.
    5. Jean‐François Gajewski, 1999. "Earnings Announcements, Asymmetric Information, Trades and Quotes," European Financial Management, European Financial Management Association, vol. 5(3), pages 411-424, November.
    6. Morse, D, 1981. "Price And Trading Volume Reaction Surrounding Earnings Announcements - A Closer Examination," Journal of Accounting Research, Wiley Blackwell, vol. 19(2), pages 374-383.
    7. McNichols, Maureen & Manegold, James G., 1983. "The effect of the information environment on the relationship between financial disclosure and security price variability," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 49-74, April.
    8. Beaver, Wh, 1968. "Information Content Of Annual Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 6, pages 67-92.
    9. Chan, Kalok & Chung, Y Peter & Johnson, Herb, 1993. "Why Option Prices Lag Stock Prices: A Trading-Based Explanation," Journal of Finance, American Finance Association, vol. 48(5), pages 1957-1967, December.
    10. Kothari, S. P. & Sloan, Richard G., 1992. "Information in prices about future earnings : Implications for earnings response coefficients," Journal of Accounting and Economics, Elsevier, vol. 15(2-3), pages 143-171, August.
    11. Danielsen, Bartley R. & Sorescu, Sorin M., 2001. "Why Do Option Introductions Depress Stock Prices? A Study of Diminishing Short Sale Constraints," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(4), pages 451-484, December.
    12. Corrado, Charles J. & Zivney, Terry L., 1992. "The Specification and Power of the Sign Test in Event Study Hypothesis Tests Using Daily Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(3), pages 465-478, September.
    13. Jerome B. Detemple, 1990. "Financial Innovation, Values and Volatilities when Markets Are Incomplete*," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 15(1), pages 47-53, March.
    14. Stoll, Hans R. & Whaley, Robert E., 1990. "The Dynamics of Stock Index and Stock Index Futures Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(4), pages 441-468, December.
    15. Kaushik I. Amin & Charles M. C. Lee, 1997. "Option Trading, Price Discovery, and Earnings News Dissemination," Contemporary Accounting Research, John Wiley & Sons, vol. 14(2), pages 153-192, June.
    16. Back, Kerry, 1993. "Asymmetric Information and Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 435-472.
    17. Stephen A. Ross, 1976. "Options and Efficiency," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(1), pages 75-89.
    18. repec:bla:jfinan:v:44:y:1989:i:2:p:487-98 is not listed on IDEAS
    19. Bamber, Ls, 1986. "The Information-Content Of Annual Earnings Releases - A Trading Volume Approach," Journal of Accounting Research, Wiley Blackwell, vol. 24(1), pages 40-56.
    20. Sheikh, Aamir M & Ronn, Ehud I, 1994. "A Characterization of the Daily and Intraday Behavior of Returns on Options," Journal of Finance, American Finance Association, vol. 49(2), pages 557-579, June.
    21. Brennan, Michael J & Cao, H Henry, 1996. "Information, Trade, and Derivative Securities," The Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 163-208.
    22. repec:bla:jfinan:v:53:y:1998:i:2:p:431-465 is not listed on IDEAS
    23. Bhattacharya, Mihir, 1987. "Price Changes of Related Securities: The Case of Call Options and Stocks," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(1), pages 1-15, March.
    24. Beaver, William & Lambert, Richard & Morse, Dale, 1980. "The information content of security prices," Journal of Accounting and Economics, Elsevier, vol. 2(1), pages 3-28, March.
    25. Vijh, Anand M, 1990. "Liquidity of the CBOE Equity Options," Journal of Finance, American Finance Association, vol. 45(4), pages 1157-1179, September.
    26. Manaster, Steven & Rendleman, Richard J, Jr, 1982. "Option Prices as Predictors of Equilibrium Stock Prices," Journal of Finance, American Finance Association, vol. 37(4), pages 1043-1057, September.
    27. Patell, Jm & Wolfson, Ma, 1981. "The Ex Ante And Ex Post Price Effects Of Quarterly Earnings Announcements Reflected In Option And Stock-Prices," Journal of Accounting Research, Wiley Blackwell, vol. 19(2), pages 434-458.
    28. Damodaran, Aswath & Lim, Joseph, 1991. "The effects of option listing on the underlying stocks' return processes," Journal of Banking & Finance, Elsevier, vol. 15(3), pages 647-664, June.
    29. Harris, Lawrence, 1990. "Estimation of Stock Price Variances and Serial Covariances from Discrete Observations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(3), pages 291-306, September.
    30. repec:bla:jfinan:v:43:y:1988:i:4:p:1049-55 is not listed on IDEAS
    31. Ann B. Gillette & Douglas E. Stevens & Susan G. Watts & Arlington W. Williams, 1999. "Price and Volume Reactions to Public Information Releases: An Experimental Approach Incorporating Traders' Subjective Beliefs," Contemporary Accounting Research, John Wiley & Sons, vol. 16(3), pages 437-479, September.
    32. Jarrow, Robert A, 1980. "Heterogeneous Expectations, Restrictions on Short Sales, and Equilibrium Asset Prices," Journal of Finance, American Finance Association, vol. 35(5), pages 1105-1113, December.
    33. Detemple, Jerome & Jorion, Philippe, 1990. "Option listing and stock returns : An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 14(4), pages 781-801, October.
    34. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December.
    35. Hagerman, Robert L, 1973. "The Efficiency of the Market for Bank Stocks: An Empirical Test: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(3), pages 846-855, August.
    36. Lee, Charles M C & Ready, Mark J, 1991. "Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-746, June.
    37. Mayhew, Stewart & Sarin, Atulya & Shastri, Kuldeep, 1995. "The Allocation of Informed Trading across Related Markets: An Analysis of the Impact of Changes in Equity-Option Margin Requirements," Journal of Finance, American Finance Association, vol. 50(5), pages 1635-1653, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. George Filis & Christos Floros & Bruno Eeckels, 2011. "Option listing, returns and volatility: evidence from Greece," Applied Financial Economics, Taylor & Francis Journals, vol. 21(19), pages 1423-1435.
    2. Dar-Hsin Chen & Po-Hsun Chang, 2008. "The impact of listing stock options on the underlying securities: the case of Taiwan," Applied Financial Economics, Taylor & Francis Journals, vol. 18(14), pages 1161-1172.
    3. William Arrata & Alejandro Bernales & Virginie Coudert, 2013. "The effects of Derivatives on Underlying Financial Markets: Equity Options, Commodity Futures and Credit Default Swaps," Post-Print hal-01410748, HAL.
    4. Phillips, Blake, 2011. "Options, short-sale constraints and market efficiency: A new perspective," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 430-442, February.
    5. Madziwa, Lawrence & Pillalamarry, Mallikarjun & Chatterjee, Snehamoy, 2022. "Gold price forecasting using multivariate stochastic model," Resources Policy, Elsevier, vol. 76(C).
    6. Niels C. Thygesen & Robert N. McCauley & Guonan Ma & William R. White & Jakob de Haan & Willem van den End & Jon Frost & Christiaan Pattipeilohy & Mostafa Tabbae & Ernest Gnan & Morten Balling & Paul , 2013. "50 Years of Money and Finance: Lessons and Challenges," SUERF 50th Anniversary Volume - 50 Years of Money and Finance: Lessons and Challenges, SUERF - The European Money and Finance Forum, number 1 edited by Morten Balling & Ernest Gnan, March.
    7. Piccotti, Louis R., 2020. "Strategic trade when securitized portfolio values are unknown," Journal of Banking & Finance, Elsevier, vol. 115(C).
    8. A. Bernales, 2014. "The Effects of Information Asymmetries on the Ex-Post Success of Stock Option Listings," Working papers 495, Banque de France.
    9. Banerjee, Pradip & Chatrath, Arjun & Christie-David, Rohan & Maitra, Debasish, 2018. "The effects of options listing and delisting in a short-sale-constrained market: Evidence from the Indian equities markets," Global Finance Journal, Elsevier, vol. 35(C), pages 157-169.
    10. Sensoy, A., 2013. "Time-varying long range dependence in market returns of FEAS members," Chaos, Solitons & Fractals, Elsevier, vol. 53(C), pages 39-45.
    11. Chang, Chuang-Chang & Hsieh, Pei-Fang & Lai, Hung-Neng, 2009. "Do informed option investors predict stock returns? Evidence from the Taiwan stock exchange," Journal of Banking & Finance, Elsevier, vol. 33(4), pages 757-764, April.
    12. Agyei-Ampomah, Sam & Mazouz, Khelifa, 2011. "The comovement of option listed stocks," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2056-2069, August.
    13. William Arrata & Alejandro Bernales & Virginie Coudert, 2013. "The Effects of Derivatives on Underlying Financial Markets: Equity Options, Commodity Derivatives and Credit Default Swaps," SUERF 50th Anniversary Volume Chapters, in: Morten Balling & Ernest Gnan (ed.), 50 Years of Money and Finance: Lessons and Challenges, chapter 13, pages 445-473, SUERF - The European Money and Finance Forum.
    14. Susana Yu & Kishore Tandon & Gwendolyn Webb, 2010. "The Effects of Option Introduction on Analyst Coverage and Earnings Estimates," The American Economist, Sage Publications, vol. 55(2), pages 46-66, November.
    15. Alejandro Bernales & Massimo Guidolin, 2013. "The Effects of Information Asymmetries on the Success of Stock Option Listings," Working Papers 484, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    16. Alejandro Bernales & Thanos Verousis & Nikolaos Voukelatos & Mengyu Zhang, 2020. "What do we know about individual equity options?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(1), pages 67-91, January.
    17. Lee, Yen-Hsien & Wang, David K., 2016. "Information content of investor trading behavior: Evidence from Taiwan index options market," Pacific-Basin Finance Journal, Elsevier, vol. 38(C), pages 149-160.
    18. repec:dau:papers:123456789/5069 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Du, Brian & Fung, Scott, 2018. "Directional information effects of options trading: Evidence from the banking industry," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 149-168.
    2. Alejandro Bernales & Thanos Verousis & Nikolaos Voukelatos & Mengyu Zhang, 2020. "What do we know about individual equity options?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(1), pages 67-91, January.
    3. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    4. Jun Pan & Allen M. Poteshman, 2006. "The Information in Option Volume for Future Stock Prices," The Review of Financial Studies, Society for Financial Studies, vol. 19(3), pages 871-908.
    5. Truong, Cameron & Corrado, Charles & Chen, Yangyang, 2012. "The options market response to accounting earnings announcements," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(3), pages 423-450.
    6. Diavatopoulos, Dean & Doran, James S. & Fodor, Andy & Peterson, David R., 2012. "The information content of implied skewness and kurtosis changes prior to earnings announcements for stock and option returns," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 786-802.
    7. Muravyev, Dmitriy & Pearson, Neil D. & Paul Broussard, John, 2013. "Is there price discovery in equity options?," Journal of Financial Economics, Elsevier, vol. 107(2), pages 259-283.
    8. Alejandro Bernales & Massimo Guidolin, 2013. "The Effects of Information Asymmetries on the Success of Stock Option Listings," Working Papers 484, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    9. Geppert, Gero & Kamerschen, David R., 2008. "The effect of mergers on implied volatility of equity options," International Review of Financial Analysis, Elsevier, vol. 17(2), pages 330-344.
    10. Thuy Khang Huynh & Vijay Shenai, 2019. "Option Trading Volumes and Their Impact on Stock Prices at Earnings’ Announcements: A Study of S & P100 Stocks in the Post Crisis Era 2010-2017," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(3), pages 83-103, July.
    11. Mohamed Sellami, 2006. "Typologie des déterminants comptables de la valeur : Apports de l'approche économique de l'information dans la mesure de la valeur," Post-Print halshs-00558252, HAL.
    12. Kelley Bergsma & Vivien Csapi & Dean Diavatopoulos & Andy Fodor, 2020. "Show me the money: Option moneyness concentration and future stock returns," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(5), pages 761-775, May.
    13. Zebedee, Allan A. & Kasch-Haroutounian, Maria, 2009. "A closer look at co-movements among stock returns," Journal of Economics and Business, Elsevier, vol. 61(4), pages 279-294, July.
    14. Sonia Sanabria, 2004. "Comportamiento De Los Precios Y Volúmenes De Negociación Ante Anuncios De Beneficios Anuales," Working Papers. Serie EC 2004-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    15. Kaushik I. Amin & Charles M. C. Lee, 1997. "Option Trading, Price Discovery, and Earnings News Dissemination," Contemporary Accounting Research, John Wiley & Sons, vol. 14(2), pages 153-192, June.
    16. Banerjee, Pradip & Chatrath, Arjun & Christie-David, Rohan & Maitra, Debasish, 2018. "The effects of options listing and delisting in a short-sale-constrained market: Evidence from the Indian equities markets," Global Finance Journal, Elsevier, vol. 35(C), pages 157-169.
    17. Chaudhury, Mohammed & Elfakhami, Said, 1997. "Listing of put options: Is there any volatility effect?," Review of Financial Economics, Elsevier, vol. 6(1), pages 57-75.
    18. Dannhauser, Caitlin D., 2017. "The impact of innovation: Evidence from corporate bond exchange-traded funds (ETFs)," Journal of Financial Economics, Elsevier, vol. 125(3), pages 537-560.
    19. Turkington, Joshua & Walsh, David, 2000. "Informed traders and their market preference: Empirical evidence from prices and volumes of options and stock," Pacific-Basin Finance Journal, Elsevier, vol. 8(5), pages 559-585, October.
    20. Dennis J. Whalen & Charles D. Collver, 2004. "Informed Trading Around Earnings Announcements: Another Look," The Financial Review, Eastern Finance Association, vol. 39(3), pages 409-434, August.

    More about this item

    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:29:y:2005:i:6:p:1359-1384. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.