Price Changes of Related Securities: The Case of Call Options and Stocks

Mihir Bhattacharya

Journal of Financial and Quantitative Analysis, 1987, vol. 22, issue 1, 1-15

Abstract: This paper tests the hypothesis that option prices contain information not reflected in contemporaneous stock prices. An options transactions data base is used for the purpose. The evidence suggests that the magnitude of anticipation of stock prices by option prices is insufficient to overcome the bid/ask spread for intra-day holding periods. Implications of the profits in the overnight-holding periods are discussed.

Date: 1987
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