An Empirical Reexamination of the Impact of CBOE Option Initiation on the Volatility and Trading Volume of the Underlying Equaties: 1973-1986

Vipul K Bansal, Stephen Pruitt () and K C John Wei

The Financial Review, 1989, vol. 24, issue 1, 19-29

Abstract: This study presents an empirical analysis of the impact of Chicago Board Options Exchange option initiation on the price volatility and trading volume of the underlying equities. Virtually every firm with options listed on the Chicago Board Options Exchange from April 1973 to June 1986 is included in the empirical tests. The results of the tests strongly suggest that option listing leads to decreases in the total (but not systematic) risk of options firms. Although total trading volume appears to increase following option listing, securities listed after 1980 show smaller increases in volume than those listed in the early years of option trading. Copyright 1989 by MIT Press.

Date: 1989
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