Cardiff University | Prifysgol Caerdydd ORCA
Online Research @ Cardiff 
WelshClear Cookie - decide language by browser settings

Trading activity in options and stock around price-sensitive news announcements

Mazouz, Khelifa ORCID: https://orcid.org/0000-0001-6711-1715, Wu, Yuliang and Yin, Shuxing 2015. Trading activity in options and stock around price-sensitive news announcements. Journal of Futures Markets 35 (12) , pp. 1173-1194. 10.1002/fut.21691

[thumbnail of Mazouz K  Wu Y  and Yin S  2014  Trading activity in options and stock around price-sensitive news announcements  Journal of Futures Markets.pdf]
Preview
PDF - Accepted Post-Print Version
Download (716kB) | Preview

Abstract

This study investigates the trading activity in options and stock markets around informed events with extreme daily stock price movements. We find that informed agents are more likely to trade options prior to negative news and stocks ahead of positive news. We also show that optioned stocks overreact to the arrival of negative news, but react efficiently to positive news. However, the overreaction patterns are unique to the subsample of stocks with the lowest pre-event abnormal option/stock volume ratio (O/S). This finding suggests that the incremental benefit of option listing is related to the level of option trading activity, over and beyond the presence of an options market on the firm's stock. Finally, we find that the pre-event abnormal O/S is a better predictor of stock price patterns following a negative shock than is the pre-event O/S, implying that the former may contain more information about the future value of stocks than the latter. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Additional Information: PDF uploaded in accordance with publisher policy at http://www.sherpa.ac.uk/romeo/issn/0270-7314/ [accessed 10/10/14]
Publisher: Wiley
ISSN: 0270-7314
Date of First Compliant Deposit: 30 March 2016
Last Modified: 07 Nov 2023 03:16
URI: https://orca.cardiff.ac.uk/id/eprint/64059

Citation Data

Cited 3 times in Scopus. View in Scopus. Powered By Scopus® Data

Actions (repository staff only)

Edit Item Edit Item

Downloads

Downloads per month over past year

View more statistics