O/S: The Relative Trading Activity in Options and Stock
نویسندگان
چکیده
While many studies have focused on trading volume in the stock market, little is known about why derivatives volume varies in the cross-section or over time. We study time-series properties as well as the determinants of the options/stock trading volume ratio (O/S) using a comprehensive cross-section and time-series of data on equities and their listed options. O/S is related to many intuitive determinants such as delta and trading costs, and it also varies with institutional holdings, analyst following, and analyst forecast dispersion. O/S is higher around earnings announcements (suggesting increased trading in the options market), and higher O/S predicts lower abnormal returns after the earnings announcement, suggesting that options trading improves market efficiency. Contacts RollSchwartz Subrahmanyam Voice: 1-310-825-6118 1-310-825-2873 1-310-825-5355 Fax: 206 8404 6384 06 4 E-mail [email protected] [email protected] [email protected] Contact: Anderson School An erson School Anderson Sch ol UCLA UCLA UCLA L s Angeles, CA 90095-1481 Los ngeles, CA 90095-1481 Los ngeles, CA 9 095-1481 O/S: The Relative Trading Activity in Options and Stock
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