Mazouz, Khelifa  ORCID: https://orcid.org/0000-0001-6711-1715 and Bowe, Michael
2009.
Does options listing impact on the time-varying risk characteristics of the underlying stocks? Evidence from NYSE stocks listed on the CBOE.
Applied Financial Economics
19
(3)
, pp. 203-212.
10.1080/09603100801964396
|
Abstract
This article extends Mayhew and Mihov (200422. Mayhew, S and Mihov, V. 2004. How do exchanges select stocks for option listing?. Journal of Finance, 59: 447–71. View all references) and Mazouz (200423. Mazouz, K. 2004. The effect of CBOE Option listing on the time varying total risk of the underlying stocks. Journal of Empirical Finance, 11: 695–708. View all references) by investigating if either the (time-varying) systematic or diversifiable risk of a NYSE-traded stock is impacted when its option is listed on the Chicago Board Option Exchange (CBOE). We employ a Kalman Filter to estimate time-varying betas, and apply a GARCH(1,1) process on the one-step-ahead forecast error to estimate conditional diversifiable risk. An individual stock approach rather than the customary portfolio approach is adopted. A control sample accommodates possible risk changes resulting from the endogenous nature of the exchange's option listing decision, and the potential impact of changes in market- and industry-wide conditions. The evidence indicates that option listing has no significant predictable impact on either risk characteristic.
| Item Type: | Article |
|---|---|
| Date Type: | Publication |
| Status: | Published |
| Schools: | Business (Including Economics) |
| Subjects: | H Social Sciences > HF Commerce H Social Sciences > HG Finance |
| Publisher: | Routledge |
| ISSN: | 0960-3107 |
| Last Modified: | 27 Oct 2022 08:15 |
| URI: | https://orca.cardiff.ac.uk/id/eprint/61693 |
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