Stock Market Quality in the Presence of a Traded Option
We use an economic experiment to examine the implications of asymmetric information for linkages between a stock and a traded option. We find the presence of the option splits price discovery across markets and changes the process by which conditional expectations are updated. The time series properties of the stock price depend directly on the intrinsic value of the option: when the intrinsic value of the option is positive, informational efficiency is higher in the market for the stock and volatility is lower. We provide evidence that the introduction of an option improves market quality in the underlying asset.
Year of publication: |
2006
|
---|---|
Authors: | Jong, Cyriel de ; Koedijk, Kees G. ; Schnitzlein, Charles R. |
Published in: |
The Journal of Business. - University of Chicago Press. - Vol. 79.2006, 4, p. 2243-2274
|
Publisher: |
University of Chicago Press |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Stock market quality in the presence of a traded option
Jong, Cyriel de, (2006)
-
Stock Market Quality in the Presence of a Traded Option
Jong, Cyriel de, (2006)
-
Stock market quality in the presence of a traded option
DeJong, Cyriel, (2002)
- More ...