The Dynamic Relation Between Options Trading, Short Selling, and Aggregate Stock Returns

56 Pages Posted: 1 Sep 2012 Last revised: 16 Apr 2015

See all articles by Jared DeLisle

Jared DeLisle

Utah State University - Huntsman School of Business

Bong-Soo Lee

Florida State University

Nathan Mauck

University of Missouri - Kansas City

Date Written: April 15, 2015

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.

Keywords: Short trading, options market, informed traders

JEL Classification: G12, G14, G17

Suggested Citation

DeLisle, R. Jared and Lee, Bong-Soo and Mauck, Nathan, The Dynamic Relation Between Options Trading, Short Selling, and Aggregate Stock Returns (April 15, 2015). Review of Quantitative Finance and Accounting, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2139600 or http://dx.doi.org/10.2139/ssrn.2139600

R. Jared DeLisle

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
4357972310 (Phone)

Bong-Soo Lee

Florida State University ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-4713 (Phone)

HOME PAGE: http://www.cob.fsu.edu/fin/display_faculty_info.cfm?pID=401

Nathan Mauck (Contact Author)

University of Missouri - Kansas City ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

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