Option Trading and Stock Price Informativeness

Jie Cao, Amit Goyal, Sai Ke and Xintong Zhan
Additional contact information
Jie Cao: The Chinese University of Hong Kong (CUHK) - CUHK Business School
Sai Ke: University of Houston - C.T. Bauer College of Business
Xintong Zhan: The Chinese University of Hong Kong (CUHK) - CUHK Business School

No 19-74, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We examine the impact of single-name option trading on stock price informativeness. By documenting a robust relation and establishing causality, we confirm that option trading causes the stock price to incorporate more firm-specific information. Our findings are through the channels of investors’ acquiring more information and through managers’ voluntary release. The findings are driven by firms with higher information asymmetry and firms with more efficiently priced options.

Keywords: option trading; price informativeness; stock synchronicity; information acquisition and production (search for similar items in EconPapers)
JEL-codes: G02 G12 G13 G14 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2019-06
New Economics Papers: this item is included in nep-cfn and nep-mst
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1974

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