Price and Volume Effects of Exchange‐Traded Barrier Options: Evidence from Callable Bull/Bear Contracts
Adrian C. H. Lei
Journal of Futures Markets, 2015, vol. 35, issue 11, 1042-1066
Abstract:
This study examines the effects of the Mandatory Call Events (MCEs) of Callable Bull/Bear Contracts (CBBCs) on the underlying stocks. The recent development of CBBCs in Hong Kong creates a unique opportunity to study this new derivative instrument. There are significant abnormal returns and volumes around MCEs. The substantial amount of price reversal after MCEs in both interday and intraday results supports the notion of stock price manipulation. Also, a greater outstanding number of issues in the market increases the chance of MCEs. We also show that the abnormal volume leads to the abnormal returns around MCEs, implying that abnormal trading activities can cause MCEs. This article shows that a market with a substantial amount of touch‐and‐out options trading may induce manipulation of the underlying stocks. Our study suggests that restricting issuers from unwinding hedged positions before the termination of exchange‐traded barrier options could improve investors' protection. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:1042–1066, 2015
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
http://hdl.handle.net/
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:wly:jfutmk:v:35:y:2015:i:11:p:1042-1066
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314
Access Statistics for this article
Journal of Futures Markets is currently edited by Robert I. Webb
More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().