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The Price Effect of Option Introduction

The Price Effect of Option Introduction ABSTRACT This paper examines the price effect of option introduction from 1974 to 1980. The introduction of individual options causes a permanent price increase in the underlying security, beginning approximately three days before introduction. The price effect appears to be associated with introduction, and not announcement, throughout the sample period. Excess returns volatility declines with option introduction. Systematic risk is unchanged. There is a positive relation between the price increase and a measure of activity in the options market. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

The Price Effect of Option Introduction

The Journal of Finance , Volume 44 (2) – Jun 1, 1989

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References (17)

Publisher
Wiley
Copyright
1989 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1989.tb05068.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper examines the price effect of option introduction from 1974 to 1980. The introduction of individual options causes a permanent price increase in the underlying security, beginning approximately three days before introduction. The price effect appears to be associated with introduction, and not announcement, throughout the sample period. Excess returns volatility declines with option introduction. Systematic risk is unchanged. There is a positive relation between the price increase and a measure of activity in the options market.

Journal

The Journal of FinanceWiley

Published: Jun 1, 1989

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