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Stock Option Listings:Information versus Liquidity Effects

Author

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  • Thomas Kraus
  • Heinz Zimmermann

Abstract

We investigate the impact of options listings on the variance of the underlying stock returns in the Swiss equity market using a non-parametric approach. The emergence of multiple share categories in most Swiss firms, combined with the fact that (listed) options are typically not introduced on all of these categories simultaneously, allows us to discriminate between share specific liquidity effects and firm wide information effects. We are able to attribute the well-known stabilization effects of options listings primarily to these latter information effects. Moreover, the study explicitly differentiates between short and long term variance effects and finds substantial differences in the timely reaction pattern.

Suggested Citation

  • Thomas Kraus & Heinz Zimmermann, 2002. "Stock Option Listings:Information versus Liquidity Effects," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(I), pages 83-97, March.
    • Handle: RePEc:ses:arsjes:2002-i-5
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    References listed on IDEAS

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    Cited by:

    1. Jahangir Sultan, 2012. "Options on federal funds futures and interest rate volatility," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 32(4), pages 330-359, April.

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    More about this item

    Keywords

    option listings; liquidity effects; information effects; Swiss options exchange (SOFFEX/EUREX);
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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