Option listing and information asymmetry
Option listing increases informed and uninformed trading by 12.4% and 23.9%, respectively, in the US between 2001 and 2010, hence reducing relative information risk. We establish the causal effects using control stocks with similar propensities of listing and a quasi-natural experiment using option...
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Institutional Knowledge at Singapore Management University
2018
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sg-smu-ink.lkcsb_research-63072018-09-04T07:57:14Z Option listing and information asymmetry HU, Jianfeng Option listing increases informed and uninformed trading by 12.4% and 23.9%, respectively, in the US between 2001 and 2010, hence reducing relative information risk. We establish the causal effects using control stocks with similar propensities of listing and a quasi-natural experiment using option listing standards. The benefits are more prominent for stocks with active options trading and opaque stocks. The reduction of information risk is larger for good news than bad news, and the stock price response to earnings surprise weakens after listing. The results suggest that options improve the overall market information environment beyond substitutional effects to stock trading. 2018-05-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/5308 info:doi/10.1093/rof/rfx015 https://ink.library.smu.edu.sg/context/lkcsb_research/article/6307/viewcontent/oplist.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Options Option listing information asymmetry probability of informed trading price efficiency Corporate Finance Finance and Financial Management |
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Options Option listing information asymmetry probability of informed trading price efficiency Corporate Finance Finance and Financial Management |
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Options Option listing information asymmetry probability of informed trading price efficiency Corporate Finance Finance and Financial Management HU, Jianfeng Option listing and information asymmetry |
| description |
Option listing increases informed and uninformed trading by 12.4% and 23.9%, respectively, in the US between 2001 and 2010, hence reducing relative information risk. We establish the causal effects using control stocks with similar propensities of listing and a quasi-natural experiment using option listing standards. The benefits are more prominent for stocks with active options trading and opaque stocks. The reduction of information risk is larger for good news than bad news, and the stock price response to earnings surprise weakens after listing. The results suggest that options improve the overall market information environment beyond substitutional effects to stock trading. |
| format |
text |
| author |
HU, Jianfeng |
| author_facet |
HU, Jianfeng |
| author_sort |
HU, Jianfeng |
| title |
Option listing and information asymmetry |
| title_short |
Option listing and information asymmetry |
| title_full |
Option listing and information asymmetry |
| title_fullStr |
Option listing and information asymmetry |
| title_full_unstemmed |
Option listing and information asymmetry |
| title_sort |
option listing and information asymmetry |
| publisher |
Institutional Knowledge at Singapore Management University |
| publishDate |
2018 |
| url |
https://ink.library.smu.edu.sg/lkcsb_research/5308 https://ink.library.smu.edu.sg/context/lkcsb_research/article/6307/viewcontent/oplist.pdf |
| _version_ |
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