informed tradingstock optioninformed tradersinformed investorsinformation shareinformational roleStock and Optionscontribution to priceoptions marketsWe investigate the contribution of option markets to price discovery, using a modification of Hasbrouck's (1995) "information share" approach. Based on five ...
We also find that the private information possessed by option traders is related to forthcoming corporate earnings news.doi:10.2139/ssrn.1654138Elkamhi, RedouaneLee, YongYao, TongSsrn Electronic JournalElkamhi, R., Y. Lee, and T. Yao (2011): "Informed Option Trading and Stock Market Mispricing...
stock.Overall,thesefindingssupportthepredictionsofBlack(1975)andEasley,O’Hara,and Srinivas(1998)aboutinformedtraders’choicetoholdoptionsversusstocks,andsuggestthat optionsmarketsareanimportantvenueforinformedtraders. Keywords:informedtrading;optionmarkets;hedgefunds;investmentadvisors. ...
First, across various markets that we examine, we find evidence of informed trading activity prior to FOMC surprise announcements and this activity is concentrated in the window immediately before the scheduled release, i.e., lockup period. In the case of E-mini S&P 500 futures, for instance,...
We develop a model to analyze the effects of hedging activities by options market makers (OMMs) facing informed trading. The model suggests that OMMs' hedging activities motivated by adverse-selection risk lead to wider spreads in both stock and options markets. The hedging effect on spreads is ...
EstimatetheProbabilityofInformedTradinginChina’SStockMarket UsingtheDynamicMarkovRegimeSwitchingModel MADan NIUXiu-min WANGFang (SchoolofStatistics,SouthwesternUniversityofFinanceandEconomics,SichuanChengdu610071 China) Abstract:Theprobabilityofinformedtradinginorderdrivenmarketisthehottopicsinrecentyears. TheEKOPmodel...
Stock Return VolatilityInformed TradingRealized VolatilityPINPrior research hasshown that informed trading activity decreases the stock return volatility becausetrading causes stock prices to converge to fundamentals. On the contrary toexisting studies, this paper documents the empirical asymmetric relation...
Many financial markets around the world, including the Paris, Stockholm, Shanghai, Tokyo, and Toronto stock exchanges, are organized as limit order books. In addition, aspects of a limit order book are also incorporated into markets such as Nasdaq and the NYSE. In spite of the dominance of ...
Further, we link the origin of the IVol puzzle to the trading activity of irrational private investors as the return predictability only exists among stocks that receive a high level of private investor attention. Overall, our joint examination of option and stock markets sheds light on the ...
Do option markets substitute for stock markets? Evidence from trading on anticipated tender offer announcements Using a sample of cash tender offers occurring between 1993 and 2002, we find evidence that the options market has become the preferred venue for traders a... T Arnold,G Erwin,L Nail...