The Comovement of Option Listed Stocks

51 Pages Posted: 19 Aug 2012

See all articles by Sam Agyei-Ampomah

Sam Agyei-Ampomah

Cranfield University - School of Management

Khelifa Mazouz

University of Bradford - School of Management

Date Written: January 3, 2011

Abstract

This study examines the changes in return comovement around the listing and delisting of stock option contracts. We show that newly option listed stocks experience an increase in comovement with a portfolio of option listed stocks and a decrease in comovement with the portfolio of non-optioned stocks. Similarly, stocks that undergo option delisting exhibit a decrease in comovement with option listed stocks and an increase in comovement with non-optioned stocks. We verify the reliability of our findings in several ways. A matched sample analysis suggests that our results are not driven by factors other than option listing and we find similar results using a calendar-time approach. Further analysis reveals that commonalities in option trading may induce the comovement in the option listed stocks. Overall, our evidence is consistent with the predictions of the category or habitat view of comovement.

Keywords: Comovement, Equity option listing, Beta

JEL Classification: G12

Suggested Citation

Agyei-Ampomah, Sam and Mazouz, Khelifa, The Comovement of Option Listed Stocks (January 3, 2011). Journal of Banking and Finance, Vol. 35, No. 8, 2011. Available at SSRN: https://ssrn.com/abstract=2132048

Sam Agyei-Ampomah (Contact Author)

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom
+441234754375 (Phone)

HOME PAGE: http://www.som.cranfield.ac.uk/som/p19638/People/Faculty/Academic-Faculty-Listing-A-Z/Dr-Sam-Agyei-A

Khelifa Mazouz

University of Bradford - School of Management ( email )

Emm Lane
Bradford, West Yorkshire Bd9 4JL
United Kingdom

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