Informed trading in stock and option markets

Deskripsi

We investigate the contribution of option markets to price discovery, using a modification of Hasbrouck's ( 1995 ) "information share" approach. Based on five years of stock and options data for 60 firms, we estimate the option market's contribution to price discovery to be about 17 % on average. Option market price discovery is related to trading volume and spreads in both markets, and stock volatility. price discovery across option strike prices is related to leverage, trading volume, and spreads..Printed Journal