Mazouz, K., Wu, Y. and Yin, S. (2015) Trading activity in options and stock around price-sensitive news announcements. Journal of Futures Markets, 35 (12). pp. 1173-1194. ISSN 0270-7314
Abstract
This study investigates the trading activity in options and stock markets around informed events with extreme daily stock price movements. We find that informed agents are more likely to trade options prior to negative news and stocks ahead of positive news. We also show that optioned stocks overreact to the arrival of negative news, but react efficiently to positive news. However, the overreaction patterns are unique to the subsample of stocks with the lowest pre-event abnormal option/stock volume ratio (O/S). This finding suggests that the incremental benefit of option listing is related to the level of option trading activity, over and beyond the presence of an options market on the firm's stock. Finally, we find that the pre-event abnormal O/S is a better predictor of stock price patterns following a negative shock than is the pre-event O/S, implying that the former may contain more information about the future value of stocks than the latter.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2014 Wiley. This is an author produced version of a paper subsequently published in The Journal of Future Markets. Uploaded in accordance with the publisher's self-archiving policy. |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 22 Dec 2014 10:58 |
Last Modified: | 07 Dec 2022 16:33 |
Status: | Published |
Publisher: | Wiley |
Refereed: | Yes |
Identification Number: | 10.1002/fut.21691 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:82548 |