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Information flow between the stock and option markets: Where do informed traders trade?

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  • Chen, Carl R.
  • Lung, Peter P.
  • Tay, Nicholas S. P.

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  • Chen, Carl R. & Lung, Peter P. & Tay, Nicholas S. P., 2005. "Information flow between the stock and option markets: Where do informed traders trade?," Review of Financial Economics, Elsevier, vol. 14(1), pages 1-23.
    • Handle: RePEc:eee:revfin:v:14:y:2005:i:1:p:1-23
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    1. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," The Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
    2. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November.
    3. Rubinstein, Mark, 1985. "Nonparametric Tests of Alternative Option Pricing Models Using All Reported Trades and Quotes on the 30 Most Active CBOE Option Classes from August 23, 1976 through August 31, 1978," Journal of Finance, American Finance Association, vol. 40(2), pages 455-480, June.
    4. Jennings, Robert & Starks, Laura, 1986. "Earnings Announcements, Stock Price Adjustment, and the Existence of Option Markets," Journal of Finance, American Finance Association, vol. 41(1), pages 107-125, March.
    5. Bessembinder, Hendrik & Seguin, Paul J., 1993. "Price Volatility, Trading Volume, and Market Depth: Evidence from Futures Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(1), pages 21-39, March.
    6. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(1), pages 109-126, March.
    7. Schwert, G William & Seguin, Paul J, 1990. "Heteroskedasticity in Stock Returns," Journal of Finance, American Finance Association, vol. 45(4), pages 1129-1155, September.
    8. Back, Kerry, 1993. "Asymmetric Information and Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 435-472.
    9. Zhaohui Chen & Charles A. E. Goodhart, 1998. "Inferring Market Expectations Using Currency Option Price And Volume Data," World Scientific Book Chapters, in: Zhaohui Chen (ed.), Currency Options And Exchange Rate Economics, chapter 10, pages 183-196, World Scientific Publishing Co. Pte. Ltd..
    10. Kalok Chan & Y. Peter Chung & Wai-Ming Fong, 2002. "The Informational Role of Stock and Option Volume," The Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1049-1075.
    11. Vijh, Anand M, 1990. "Liquidity of the CBOE Equity Options," Journal of Finance, American Finance Association, vol. 45(4), pages 1157-1179, September.
    12. Manaster, Steven & Rendleman, Richard J, Jr, 1982. "Option Prices as Predictors of Equilibrium Stock Prices," Journal of Finance, American Finance Association, vol. 37(4), pages 1043-1057, September.
    13. repec:bla:jfinan:v:43:y:1988:i:4:p:949-64 is not listed on IDEAS
    14. Neil L. Fargher & Robert A. Weigand, 1998. "Changes In The Stock Price Reaction Of Small Firms To Common Information," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(1), pages 105-121, March.
    15. Conrad, Jennifer & Kaul, Gautam, 1988. "Time-Variation in Expected Returns," The Journal of Business, University of Chicago Press, vol. 61(4), pages 409-425, October.
    16. Chan, Kalok & Chung, Y Peter & Johnson, Herb, 1993. "Why Option Prices Lag Stock Prices: A Trading-Based Explanation," Journal of Finance, American Finance Association, vol. 48(5), pages 1957-1967, December.
    17. Fargher, Neil L & Weigand, Robert A, 1998. "Changes in the Stock Price Reaction of Small Firms to Common Information," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(1), pages 105-121, Spring.
    18. Stephan, Jens A & Whaley, Robert E, 1990. "Intraday Price Change and Trading Volume Relations in the Stock and Stock Option Markets," Journal of Finance, American Finance Association, vol. 45(1), pages 191-220, March.
    19. repec:bla:jfinan:v:53:y:1998:i:2:p:431-465 is not listed on IDEAS
    20. Blume, Lawrence & Easley, David & O'Hara, Maureen, 1994. "Market Statistics and Technical Analysis: The Role of Volume," Journal of Finance, American Finance Association, vol. 49(1), pages 153-181, March.
    21. Diamond, Douglas W. & Verrecchia, Robert E., 1987. "Constraints on short-selling and asset price adjustment to private information," Journal of Financial Economics, Elsevier, vol. 18(2), pages 277-311, June.
    22. Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1992. "Stock Prices and Volume," The Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 199-242.
    23. Mayhew, Stewart & Sarin, Atulya & Shastri, Kuldeep, 1995. "The Allocation of Informed Trading across Related Markets: An Analysis of the Impact of Changes in Equity-Option Margin Requirements," Journal of Finance, American Finance Association, vol. 50(5), pages 1635-1653, December.
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    2. Choi, Gahyun & Park, Kwangyeol & Yi, Eojin & Ahn, Kwangwon, 2023. "Price fairness: Clean energy stocks and the overall market," Chaos, Solitons & Fractals, Elsevier, vol. 168(C).
    3. Doojin Ryu & Heejin Yang, 2018. "The directional information content of options volumes," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(12), pages 1533-1548, December.
    4. Atilgan, Yigit, 2014. "Volatility spreads and earnings announcement returns," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 205-215.
    5. Ming-Yuan Leon Li & Chun-Nan Chen, 2010. "Examining the interrelation dynamics between option and stock markets using the Markov-switching vector error correction model," Journal of Applied Statistics, Taylor & Francis Journals, vol. 37(7), pages 1173-1191.
    6. C. José García Martín & Begoña Herrero Piqueras & Ana María Ibáñez Escribano, 2016. "The informational role of thin options markets: Empirical evidence from the Spanish case," Estudios de Economia, University of Chile, Department of Economics, vol. 43(2 Year 20), pages 233-263, December.
    7. Doojin Ryu & Jinyoung Yu, 2021. "Informed options trading around holidays," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(5), pages 658-685, May.
    8. Abderrahmen Aloulou & Siwar Ellouze, 2017. "Does fundamental value run asset price formation process? Evidence from option price information content," Journal of Asset Management, Palgrave Macmillan, vol. 18(4), pages 255-268, July.
    9. Natividad Blasco & Pilar Corredor & Rafael Santamaría, 2010. "Does informed trading occur in the options market? Some revealing clues," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(3), pages 555-579, September.
    10. Ting-Huan Chang, 2011. "Risk preference and trading motivation measurement due to moneyness: evidence from the S&P 500 Index option market," Applied Financial Economics, Taylor & Francis Journals, vol. 21(14), pages 1049-1057.
    11. Kaplanski, Guy & Levy, Haim, 2015. "Trading breaks and asymmetric information: The option markets," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 390-404.
    12. Rajesh Pathak & Kaushik Bhattacharjee & Nagi Reddy V., 2015. "Information Content of Derivatives under Varying Market Conditions and Moneyness: The Case of S&P CNX Nifty Index Options," Global Business Review, International Management Institute, vol. 16(2), pages 281-302, April.
    13. Tran, Vu & Alsakka, Rasha & ap Gwilym, Owain, 2014. "Sovereign rating actions and the implied volatility of stock index options," International Review of Financial Analysis, Elsevier, vol. 34(C), pages 101-113.
    14. Rajesh Pathak & Thanos Verousis & Yogesh Chauhan, 2017. "Information Content of Implicit Spot Prices Embedded in Single Stock Future Prices: Evidence from Indian Market," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 16(2), pages 169-187, August.

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