An Empirical Reexamination of the Impact of CBOE Option Initiation on the Volatility and Trading Volume of the Underlying Equities: 1973–1986

Vipul K. Bansal; Stephen W. Pruitt; K. C.John Wei

doi:10.1111/j.1540-6288.1989.tb00328.x

An Empirical Reexamination of the Impact of CBOE Option Initiation on the Volatility and Trading Volume of the Underlying Equities: 1973–1986

Vipul K. Bansal
, Stephen W. Pruitt
, K. C.John Wei

Research output: Journal article publication › Journal article › Academic research › peer-review

56 Citations (Scopus)

Abstract

This study presents an empirical analysis of the impact of Chicago Board Options Exchange (CBOE) option initiation on the price volatility and trading volume of the underlying equities. Virtually every firm with options listed on the CBOE from April 1973 to June 1986 is included in the empirical tests. The results of the tests strongly suggest that option listing leads to decreases in the total (but not systematic) risk of optioned firms. Although total trading volume appears to increase following option listing, securities listed after 1980 show smaller increases in volume than those listed in the early years of option trading.

Original language	English
Pages (from-to)	19-29
Number of pages	11
Journal	Financial Review
Volume	24
Issue number	1
DOIs	https://doi.org/10.1111/j.1540-6288.1989.tb00328.x
Publication status	Published - Feb 1989
Externally published	Yes

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1111/j.1540-6288.1989.tb00328.x

Cite this

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AB - This study presents an empirical analysis of the impact of Chicago Board Options Exchange (CBOE) option initiation on the price volatility and trading volume of the underlying equities. Virtually every firm with options listed on the CBOE from April 1973 to June 1986 is included in the empirical tests. The results of the tests strongly suggest that option listing leads to decreases in the total (but not systematic) risk of optioned firms. Although total trading volume appears to increase following option listing, securities listed after 1980 show smaller increases in volume than those listed in the early years of option trading.

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An Empirical Reexamination of the Impact of CBOE Option Initiation on the Volatility and Trading Volume of the Underlying Equities: 1973–1986

Abstract

ASJC Scopus subject areas

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