Volume, volatility and information linkages in the stock and option markets

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dc.contributor.authorHo, Kin-Yip
dc.contributor.authorZheng, L
dc.contributor.authorZhang, Zhaoyong
dc.date.accessioned2015-12-10T23:33:20Z
dc.date.issued2012
dc.date.updated2016-02-24T08:52:14Z
dc.description.abstractThis paper examines the relationship between option trading activity and stock market volatility. Although the option market is uniquely suited for trading on volatility information, there is little analysis on how trading activity in this market is linked to stock price volatility. The bulk of the discussion tends to focus on whether trading activity in the stock market is informative about stock volatility. To analyze the information in option trading activity for stock market volatility, a sample of 15 stocks with the highest option trading volume is selected. For each stock, it is noted that the trading activities in the put and call option markets have significant explanatory power for stock market volatility. In addition, the results indicate that the call option trading activity has a stronger impact on stock volatility compared with that of the put options. Our results demonstrate that information and sentiment in the option market is useful for the estimation of stock market volatility. Also, the significance of the effects of option trading activity on stock price volatility is observed to be comparable to that of stock market trading activity. Furthermore, the persistence and asymmetric effects in the volatility of some stocks tend to disappear once option trading activity is taken into account.
dc.identifier.issn1058-3300
dc.identifier.urihttp://hdl.handle.net/1885/69249
dc.publisherElsevier
dc.sourceReview of Financial Economics
dc.subjectKeywords: Asymmetric effects; Information linkage; Option trading volume; Stock market volatility
dc.titleVolume, volatility and information linkages in the stock and option markets
dc.typeJournal article
local.bibliographicCitation.issue4
local.bibliographicCitation.lastpage174
local.bibliographicCitation.startpage168
local.contributor.affiliationHo, Kin-Yip, College of Business and Economics, ANU
local.contributor.affiliationZheng, L, City College of New York
local.contributor.affiliationZhang, Zhaoyong, Edith Cowan University
local.contributor.authoremailu4867077@anu.edu.au
local.contributor.authoruidHo, Kin-Yip, u4867077
local.description.embargo2037-12-31
local.description.notesImported from ARIES
local.identifier.absfor150200 - BANKING, FINANCE AND INVESTMENT
local.identifier.ariespublicationf5625xPUB1968
local.identifier.citationvolume21
local.identifier.doi10.1016/j.rfe.2012.06.001
local.identifier.scopusID2-s2.0-84869093058
local.identifier.uidSubmittedByf5625
local.type.statusPublished Version

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