Stock Option Listings:Information versus Liquidity Effects

Thomas Kraus and Heinz Zimmermann

Swiss Journal of Economics and Statistics (SJES), 2002, vol. 138, issue I, 83-97

Abstract: We investigate the impact of options listings on the variance of the underlying stock returns in the Swiss equity market using a non-parametric approach. The emergence of multiple share categories in most Swiss firms, combined with the fact that (listed) options are typically not introduced on all of these categories simultaneously, allows us to discriminate between share specific liquidity effects and firm wide information effects. We are able to attribute the well-known stabilization effects of options listings primarily to these latter information effects. Moreover, the study explicitly differentiates between short and long term variance effects and finds substantial differences in the timely reaction pattern.

Keywords: option listings; liquidity effects; information effects; Swiss options exchange (SOFFEX/EUREX) (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (1)

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