Please use this identifier to cite or link to this item: http://scholarbank.nus.edu.sg/handle/10635/45239
Title: The effects of option listing on the underlying stocks' return processes
Authors: Damodaran, A.
Lim, J. 
Issue Date: 1991
Source: Damodaran, A.,Lim, J. (1991). The effects of option listing on the underlying stocks' return processes. Journal of Banking and Finance 15 (3) : 647-664. ScholarBank@NUS Repository.
Abstract: The effects of option listing on the returns processes of the underlying securities are examined in this paper by looking at a sample of 200 firms which had options listed on them on the CBOE and the AMEX between 1973 and 1983. We find that the listing of options leads to significantly lower variance in the daily returns or the underlying stocks. We also find that prices adjust much more quickly to new information and that the noise component declines after the listing of options. We trace the speedier price adjustment process to increased information collection after the listing and the reduced noise after the listing to a decline in the bid-ask spread after option listing, partially because of increased competition from market-makers on the option market and partially because of increased institutional interest in the stocks after listing. © 1991.
Source Title: Journal of Banking and Finance
URI: http://scholarbank.nus.edu.sg/handle/10635/45239
ISSN: 03784266
Appears in Collections:Staff Publications

Show full item record
Files in This Item:
There are no files associated with this item.

Page view(s)

100
checked on Dec 15, 2017

Google ScholarTM

Check


Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.