Trading Volume Lead/Lag Relations Between the ASX and ASX Option Market: Implications of Market Microstructure

Elvis Jarnecic
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Elvis Jarnecic: Department of Finance, University of Sydney, NSW 2006

Australian Journal of Management, 1999, vol. 24, issue 1, 77-94

Abstract: This study documents the intraday lead/lag relation between trading volumes of stocks and stock options traded on the ASX and ASX Options Market respectively. A stock lead of up to 15 minutes is initially documented. Differences in intraday lead/lag relations may occur because of the different nature of equities and options as instruments of investment, or market microstructure differences, or both these factors The study finds no evidence that trading on private infor Mation causes the option market to lead. Instead, market microstructure differences induce relatively infrequent trading in option markets and consequently cause stocks to lead Specifically, we find the stock lead is eliminated when only periods of frequent trading are examined. Also, the infrequent trading induced stock lead is partly explained by the different opening procedures of the two markets

Keywords: OPTIONS MARKET; EQUITY MARKET; LEAD/LAG RELATIONS; TRADING VOLUME (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:24:y:1999:i:1:p:77-94

DOI: 10.1177/031289629902400105

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