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New Evidence On Price And Volatility Effects Of Stock Option Introductions (1997)
BibTeX
@MISC{Tilburg97newevidence,
author = {Rezaul Kabir Tilburg and Rezaul Kabir},
title = {New Evidence On Price And Volatility Effects Of Stock Option Introductions},
year = {1997}
}
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Abstract
The empirical evidence on the effect of options trading on the underlying stocks primarily comes from the United States. The existing literature is surveyed by Damodaran and Subrahmanyam (1992). They find a consistent evidence of positive excess returns with the introduction of call options and negative excess returns with the introduction of put options. They also find strong evidence of a decline of stock volatility after option listing. It is interesting to examine if markets other than the United States exhibit similar results. This paper, therefore, adds to the literature by examining data from the Dutch market. The paper is also distinct from prior studies in two more aspects: (a) both stock return and volatility effects are examined; and (b) three different samples - simultaneous listings of call and put options, call options alone, and put options alone - are separately investigated. In significant contrast to previous results, we find a decline in stock price associated with t...
Keyphrases
volatility effect new evidence stock option introduction put option united state prior study stock return dutch market significant contrast negative excess return option listing positive excess return stock volatility different sample simultaneous listing similar result empirical evidence stock price strong evidence consistent evidence call option previous result
