Article1988

The Interrelation of Stock and Options Market Trading-Volume Data

207 citations0/0 files storedThe Journal of Finance

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Financial Markets and Investment Strategies Stochastic processes and financial applications Financial Risk and Volatility Modeling

Abstract

ABSTRACT This research empirically investigates the relation between common stock and call option trading volumes. The paper hyothesizes and tests a sequential flow of information between the stock and option markets. If information trading for CBOE‐listed firms is predominantly accomplished through option trading, then existing research methodologies may be biased against finding any significant economic consequences in those instances where option listing is an important variable. Results indicate that trading in call options leads trading in the underlying shares, with a one‐day lag.

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References

1969Investigating Causal Relations by Econometric Models and Cross-spectral Methods 1977Time Series Analysis: Forecasting and Control 1972MONEY, INCOME, AND CAUSALITY 1977Estimating betas from nonsynchronous data 1975Applied Linear Statistical Models.1975Fact and Fantasy in the Use of Options 1979Forecasting Economic Time Series 1986Forecasting Economic Time Series

Cited by

1991The effects of option listing on the underlying stocks' return processes 2012Is there price discovery in equity options?2008Informed trading in the index option market: The case of KOSPI 200 options 2005Informational Content of Option Volume Prior to Takeovers 1995Return and volatility dynamics in the FT‐SE 100 stock index and stock index futures markets 2013The Joint Cross Section of Stocks and Options 1992Options Trading and the Bid-Ask Spread of the Underlying Stocks

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