Option volume and stock price behavior: Some evidence from the Chicago board options exchange
This study examines the relationship between selected Chicago Board Options Exchange option volume and underlying stock prices using intraday data for the period January 3, 1989 to January 31, 1989. The data were prefiltered and aggregated into 15-minute intervals. Causality tests were performed using Granger's method. The test results indicate that the option volume-stock price relationship is largely characterized by feedback, with option volume causing stock price changes and vice versa. The evidence also suggests that the relationship only persists for very short time periods, with little or no opportunity for market participants to devise profitable trading strategies utilizing one market's information in the other market. Copyright International Atlantic Economic Society 1997
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Volume (Year): 25 (1997)
Issue (Month): 4 (December)
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- Granger, C. W. J. & Newbold, Paul, 1986. "Forecasting Economic Time Series," Elsevier Monographs, Elsevier, edition 2, number 9780122951831 edited by Shell, Karl.
- David Easley & Maureen O'Hara & P.S. Srinivas, 1998. "Option Volume and Stock Prices: Evidence on Where Informed Traders Trade," Journal of Finance, American Finance Association, vol. 53(2), pages 431-465, April.
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