Why Do Option Introductions Depress Stock Prices? A Study of Diminishing Short Sale Constraints
Early studies find that option introductions tend to raise the price of underlying stocks. More recent research indicates that post-1980 option introductions are associated with negative abnormal returns in underlying stocks. Other studies document increased short sale activities following option li...
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Veröffentlicht in: | Journal of financial and quantitative analysis 2001-12, Vol.36 (4), p.451-484 |
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container_title | Journal of financial and quantitative analysis |
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creator | Danielsen, Bartley R. Sorescu, Sorin M. |
description | Early studies find that option introductions tend to raise the price of underlying stocks. More recent research indicates that post-1980 option introductions are associated with negative abnormal returns in underlying stocks. Other studies document increased short sale activities following option listing. This paper provides evidence that the documented abnormal returns and changes in short interest around option listings are consistent with the mitigation of short sale constraints resulting from the option introduction, and that both the abnormal returns and short interest changes around listing dates can be predicted using ex ante characteristics of the underlying stock. |
doi_str_mv | 10.2307/2676220 |
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A Study of Diminishing Short Sale Constraints</atitle><jtitle>Journal of financial and quantitative analysis</jtitle><addtitle>J. Financ. Quant. Anal</addtitle><date>2001-12-01</date><risdate>2001</risdate><volume>36</volume><issue>4</issue><spage>451</spage><epage>484</epage><pages>451-484</pages><issn>0022-1090</issn><eissn>1756-6916</eissn><coden>JFQAAC</coden><abstract>Early studies find that option introductions tend to raise the price of underlying stocks. More recent research indicates that post-1980 option introductions are associated with negative abnormal returns in underlying stocks. Other studies document increased short sale activities following option listing. This paper provides evidence that the documented abnormal returns and changes in short interest around option listings are consistent with the mitigation of short sale constraints resulting from the option introduction, and that both the abnormal returns and short interest changes around listing dates can be predicted using ex ante characteristics of the underlying stock.</abstract><cop>New York, USA</cop><pub>Cambridge University Press</pub><doi>10.2307/2676220</doi><tpages>34</tpages></addata></record> |
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source | EBSCOhost Business Source Complete; JSTOR Archive Collection A-Z Listing; Cambridge University Press Journals Complete |
subjects | Abnormal returns Beta Certificates of deposit Economic models Endowment Equilibrium Equilibrium models Hypotheses Interest Investments Investors Market prices Modeling Option pricing Options markets Options on stocks Options trading Pessimism Prices Pricing Put & call options Quantitative analysis Rates of return Sales Securities markets Security prices Short sales Stock exchange Stock exchanges Stock options Stock prices Stock sales Stocks Studies |
title | Why Do Option Introductions Depress Stock Prices? A Study of Diminishing Short Sale Constraints |
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