Option Trading and Stock Price Informativeness

58 Pages Posted: 18 Jun 2019

See all articles by Jie Cao

Jie Cao

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Amit Goyal

University of Lausanne; Swiss Finance Institute

Sai Ke

The Chinese University of Hong Kong (CUHK)

Xintong Zhan

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Date Written: March 2019

Abstract

We examine the impact of single-name option trading on stock price informativeness. By documenting a robust relation and establishing causality, we confirm that option trading causes the stock price to incorporate more firm-specific information. Our findings are through the channels of investors’ acquiring more information and through managers’ voluntary release. The findings are driven by firms with higher information asymmetry and firms with more efficiently priced options.

Keywords: option trading, price informativeness, stock synchronicity, information acquisition and production

JEL Classification: G02, G12, G13, G14

Suggested Citation

Cao, Jie and Goyal, Amit and Ke, Sai and Zhan, Xintong, Option Trading and Stock Price Informativeness (March 2019). Available at SSRN: https://ssrn.com/abstract=3401806 or http://dx.doi.org/10.2139/ssrn.3401806

Jie Cao

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, NT
Hong Kong
(852) 3943 7757 (Phone)
(852) 2603 6586 (Fax)

HOME PAGE: http://sites.google.com/site/jiejaycao

Amit Goyal (Contact Author)

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Sai Ke

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

Xintong Zhan

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
Shatin, NT
Hong Kong

HOME PAGE: http://sites.google.com/view/xintongzhan

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