What do options have to do with it?: Inclusion of options market indicators in bid-ask spread decomposition

Michayluk, D; Prather, L; Woo, LAE; Yip, HYK

What do options have to do with it?: Inclusion of options market indicators in bid-ask spread decomposition

Michayluk, D

Prather, L Woo, LAE Yip, HYK

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Publication Type:: Journal Article
Citation:: Asia-Pacific Journal of Financial Studies, 2009, 38 (3), pp. 455 - 489
Issue Date:: 2009-06-01

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Field	Value	Language
dc.contributor.author	Michayluk, D https://orcid.org/0000-0001-9020-0855	en_US
dc.contributor.author	Prather, L	en_US
dc.contributor.author	Woo, LAE	en_US
dc.contributor.author	Yip, HYK	en_US
dc.date.issued	2009-06-01	en_US
dc.identifier.citation	Asia-Pacific Journal of Financial Studies, 2009, 38 (3), pp. 455 - 489	en_US
dc.identifier.issn	1226-1165	en_US
dc.identifier.uri	http://hdl.handle.net/10453/10276
dc.description.abstract	This paper develops a cross-market model to extend Huang and Stoll (1997) by utilizing information from trade flows in the options market. Empirical tests reveal a significant increase in the estimated adverse information component, which stays consistent irrespective of the degree of option leverage. Further, intraday variation in stock bid-ask spread components is affected by the stock trade size and the extent of imbalance in information- based option trades. Including the options market information in decomposition of the stock bid-ask spread enhances the quality of its estimation.	en_US
dc.relation.ispartof	Asia-Pacific Journal of Financial Studies	en_US
dc.relation.isbasedon	10.1111/j.2041-6156.2009.tb00020.x	en_US
dc.title	What do options have to do with it?: Inclusion of options market indicators in bid-ask spread decomposition	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	38	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
dc.location.activity	ISI:000267629500005	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	closed_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	38	en_US

Abstract:

This paper develops a cross-market model to extend Huang and Stoll (1997) by utilizing information from trade flows in the options market. Empirical tests reveal a significant increase in the estimated adverse information component, which stays consistent irrespective of the degree of option leverage. Further, intraday variation in stock bid-ask spread components is affected by the stock trade size and the extent of imbalance in information- based option trades. Including the options market information in decomposition of the stock bid-ask spread enhances the quality of its estimation.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/10276