EconPapers    
Economics at your fingertips  
 

The interactions between trading volume and volatility: evidence from the equity options markets

Tae Park, Lorne Switzer () and Robert Bedrossian

Applied Financial Economics, 1999, vol. 9, issue 6, 627-637

Abstract: This study examines the relation between trading activity of equity options and the volatilities of the underlying equities. A sample of 45 companies with the most actively traded equity options at the Chicago Board of Options Exchange is selected and, for each company, equity price variability is compared with related stock and option trading volume. The significance of options trading activity in explaining the conditional volatilities of the underlying equities is comparable to that of stock trading activity, indicating a high degree of integration of the equity and the options markets. We also find that unexpected options trading activity contributes to enhanced volatility of the underlying equity returns. Finally, the analysis indicates that expected options trading activity significantly affects equity volatility in only a minority of firms. This is consistent with the contention that trading in the equity options market does not systematically lead to price destabilization in the underlying equity market.

Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/096031099332078 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apfiec:v:9:y:1999:i:6:p:627-637

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/096031099332078

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2021-05-15
Handle: RePEc:taf:apfiec:v:9:y:1999:i:6:p:627-637