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Options listings and individual equity volatility

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  • Daniel Jubinski
  • Marc Tomljanovich

Abstract

This article examines the effect of options introduction on the conditional volatility of 1,576 individual firms over the 1973–1996 time period. With the use of a GJR‐GARCH specification for daily volatility, it is found, for the majority of firms, that option listing does not impact the underlying equity security. Listing effects are identified for a small subset of firms, specifically smaller firms with high trading volume and/or volatility. For these firms there is evidence of a change in the conditional volatility process after option listing, and it is concluded that options continue to provide additional information about the underlying equity for these companies. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27: 1–27, 2007

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  • Daniel Jubinski & Marc Tomljanovich, 2007. "Options listings and individual equity volatility," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 27(1), pages 1-27, January.
    • Handle: RePEc:wly:jfutmk:v:27:y:2007:i:1:p:1-27
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