Download This PaperOptions Trading and Stock Price Informativeness
Swiss Finance Institute Research Paper No. 19-74
Journal of Financial and Quantitative Analysis, volume 59, issue 4, 2024[10.1017/S0022109023000327]
42 Pages Posted: 18 Jun 2019 Last revised: 9 Apr 2026
Date Written: December 10, 2022
Abstract
We document the causal effects of single-name options trading on the absolute level of information content of prices (stock price informativeness) by exploiting the Penny Pilot Program as an exogenous shock to options trading volume. We find that options trading increases underlying stock price informativeness and information acquisition by both option and stock investors, consistent with the framework of Goldstein and Yang (2015). The findings are driven by firms for which options are more important sources for information and firms with more efficiently priced options. Options market introduction in a sample of 25 other economies also leads to higher price informativeness.
Keywords: option trading, price informativeness, stock synchronicity, information acquisition and production
JEL Classification: G02, G12, G13, G14
Suggested Citation: Suggested Citation
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