Option Listing, Information Production and the Stock Price Response to Earnings Announcements

39 Pages Posted: 11 Nov 2008

See all articles by Donald H. Fehrs

Donald H. Fehrs

affiliation not provided to SSRN

Richard R. Mendenhall

University of Notre Dame - Department of Finance

Date Written: December 1994

Abstract

This paper addresses the issue of whether investors produce more information on firms that have listed stock options than on similar firms that do not have options and, if so, whether this additional information translates into a smaller stock-price reaction to releases of public information such as earnings announcements. After correcting for factors previously found to explain changes in two indicators of investor interest, analyst attention and institutional ownership, we find that firms with listed options exhibit significantly higher average levels of each of these variables than firms without listed options. Prior results regarding this issue are limited and contradictory. We also find, contrary to previous research, that this additional information production does not lead to a smaller price reaction to earnings announcements. The remainder of the introduction discusses prior research as well as the motivation for this study.

Suggested Citation

Fehrs, Donald H. and Mendenhall, Richard R., Option Listing, Information Production and the Stock Price Response to Earnings Announcements (December 1994). NYU Working Paper No. FIN-94-030, Available at SSRN: https://ssrn.com/abstract=1299455

Donald H. Fehrs (Contact Author)

affiliation not provided to SSRN

No Address Available

Richard R. Mendenhall

University of Notre Dame - Department of Finance ( email )

330 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6076 (Phone)
574-631-5255 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
76
Abstract Views
682
Rank
567,904
PlumX Metrics