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Options listings and individual equity volatility

✍ Scribed by Daniel Jubinski; Marc Tomljanovich

Book ID: 102219909
Publisher: John Wiley and Sons
Year: 2006
Tongue: English
Weight: 211 KB
Volume: 27
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.20227

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

This article examines the effect of options introduction on the conditional volatility of 1,576 individual firms over the 1973–1996 time period. With the use of a GJR‐GARCH specification for daily volatility, it is found, for the majority of firms, that option listing does not impact the underlying equity security. Listing effects are identified for a small subset of firms, specifically smaller firms with high trading volume and/or volatility. For these firms there is evidence of a change in the conditional volatility process after option listing, and it is concluded that options continue to provide additional information about the underlying equity for these companies. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27: 1–27, 2007

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