Short sales and put options: Where is the bad news first traded?

Xiaoting Hao, Eunju Lee and Natalia Piqueira ()

Journal of Financial Markets, 2013, vol. 16, issue 2, 308-330

Abstract: Although the literature provides strong evidence supporting the presence of informed trading in both the option and the short equity markets, it is not clear which market attracts more informed trading. Using a unique dataset that covers intraday transaction data in the option and short equity markets, we investigate informed trading in a cross-market environment by explicitly studying the lead–lag relationship between the put net trade volume and short sales of the underlying stock. Our high frequency analysis shows that in general short sales contain more information. However, put options become more informative before the release of negative earnings announcements.

Keywords: Put option; Short sales; Informed trading; Earnings announcements (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:16:y:2013:i:2:p:308-330

DOI: 10.1016/j.finmar.2012.09.005

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