The dynamic relation between options trading, short selling, and aggregate stock returns

The dynamic relation between options trading, short selling, and aggregate stock returns We examine the information contained in option trading and short selling using a dynamic VAR model. First, we address whether options and shorts are complements or substitutes. Contrary to existing event studies around option listing introductions, we show short selling and options trading are complements rather than substitutes. Second, we examine which group is relatively more informed. The results indicate that options traders are relatively more informed. Finally, we examine if options are redundant. Our results indicate that options markets are non-redundant. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

The dynamic relation between options trading, short selling, and aggregate stock returns

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Publisher
Springer Journals
Copyright
Copyright © 2015 by Springer Science+Business Media New York
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-015-0516-2
Publisher site
See Article on Publisher Site

Abstract

We examine the information contained in option trading and short selling using a dynamic VAR model. First, we address whether options and shorts are complements or substitutes. Contrary to existing event studies around option listing introductions, we show short selling and options trading are complements rather than substitutes. Second, we examine which group is relatively more informed. The results indicate that options traders are relatively more informed. Finally, we examine if options are redundant. Our results indicate that options markets are non-redundant.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: May 15, 2015

References

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