Price discovery in stock and options markets
- Publisher:
- Elsevier
- Publication Type:
- Journal Article
- Citation:
- Journal of Financial Markets, 2020, 47, pp. 1-28
- Issue Date:
- 2020
Closed Access
Filename | Description | Size | |||
---|---|---|---|---|---|
1-s2.0-S1386418119303544-main.pdf | Published version | 676.42 kB |
Copyright Clearance Process
- Recently Added
- In Progress
- Closed Access
This item is closed access and not available.
Using new empirical measures of information leadership, we find that the role of options in price discovery is up to five times larger than previously thought. Approximately one-quarter of new information is reflected in options prices before being transmitted to stock prices, with options playing a more important role in price discovery around information events. Using unique data on traders prosecuted for insider trading, we find that they often choose to trade in options, attracted by their leverage, and when they do the options share of price discovery is higher. Our results help interpret conflicting findings in the existing literature.
Please use this identifier to cite or link to this item: