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How Does Option Listing Affect Underlying Stock Efficiency? Evidence from a Duration Model

Jouaber, Kaouther; Tekaya, Rim (2012-11), How Does Option Listing Affect Underlying Stock Efficiency? Evidence from a Duration Model. https://basepub.dauphine.fr/handle/123456789/13636

Type
Document de travail / Working paper
External document link
http://dx.doi.org/10.2139/ssrn.2181391
Date
2012-11
Pages
39
Metadata
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Author(s)
Jouaber, Kaouther
Dauphine Recherches en Management [DRM]
Tekaya, Rim
Abstract (EN)
We empirically investigate the effect of option listing on the underlying stock efficiency by examining the stock price duration dynamic and the informed trading activity around option listing. We use univariate tests and extended Log-ACD models that account for liquidity. Despite a significant increase in the price duration, option listing seems not to deteriorate the underlying stock efficiency. The results reject a permanent change in the informed trading activity but suggest a positive intraday seasonal impact. However, this result is not confirmed for low volume stocks. Furthermore, Euronext and Liffe merger in 2002 seems to have an impact on the duration process and the efficiency of underlying stocks.
Subjects / Keywords
Option listing; Efficiency; Price duration; Log-ACD model; Liquidity; Informed trading
JEL
C12 - Hypothesis Testing: General
C13 - Estimation: General
C41 - Duration Analysis; Optimal Timing Strategies
C51 - Model Construction and Estimation
G14 - Information and Market Efficiency; Event Studies; Insider Trading

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