A note on the impact of options on stock return volatility |
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| Affiliation: | 1. Department of Computer and Communication Engineering, National Kaohsiung First University of Science and Technology, Kaohsiung, Taiwan;2. Department of Computer Science and Information Engineering, Chang Jung Christian University, Tainan, Taiwan;1. Infection Control Unit, Gachon University Gil Medical Center, Incheon, Republic of Korea;2. Department of Internal Medicine, Gachon University Gil Medical Center, Incheon, Republic of Korea;3. Department of Preventive Medicine, Gachon University Gil Medical Center, Incheon, Republic of Korea;4. Department of Laboratory Medicine, Gachon University Gil Medical Center, Incheon, Republic of Korea;1. School of Economics & Management, Southwest Jiaotong University, Chengdu, China;2. School of Economics & Management, Nanchang University, Nanchang, China;3. School of Economics and Management, Nanjing University of Science and Technology, Nanjing, China |
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| Abstract: | This paper measures the impact of option introductions on the return variance of underlying stocks. Past research generally finds a significant reduction in stock return variance following the listing of options through 1986. Using a more extensive sample, I compare changes in the return variance of optioned stocks to changes in the return variance of a control group. Since the average change in the control group is statistically indistinguishable from the average change in the optioned stocks, I conclude that option introductions do not significantly affect stock return variance. |
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