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The Effects of Information Asymmetries on the Ex-Post Success of Stock Option Listings

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  • A. Bernales

Abstract

We examine a number of unexplored factors that affect the ex-post adoption rates of newly listed stock options. We show that a variety of measures of information asymmetries concerning underlying stocks predict option adoption rates. These predictive relationships are robust to control factors that have been found to be significant in earlier literature, such as stock volatility and volume. Nevertheless, option listings induce a reduction in the strength of the information asymmetries in the underlying stock. Further, option bid-ask spreads start from low initial levels and increase over time, which is consistent with a modest initial aggressiveness of informed investors.

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  • A. Bernales, 2014. "The Effects of Information Asymmetries on the Ex-Post Success of Stock Option Listings," Working papers 495, Banque de France.
    • Handle: RePEc:bfr:banfra:495
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    More about this item

    Keywords

    Stock options; option listings; asymmetric information; adoption rates; option volume; open interest.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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