Journal ArticleDOI
Why Do Option Introductions Depress Stock Prices? A Study of Diminishing Short Sale Constraints
TLDR
In this paper, the authors provide evidence that the documented abnormal returns and changes in short interest around option listings are consistent with the mitigation of short sale constraints resulting from the option introduction, and that both the abnormal return and short interest changes around listing dates can be predicted using ex ante characteristics of the underlying stock.Abstract:
Early studies find that option introductions tend to raise the price of underlying stocks. More recent research indicates that post-1980 option introductions are associated with negative abnormal returns in underlying stocks. Other studies document increased short sale activities following option listing. This paper provides evidence that the documented abnormal returns and changes in short interest around option listings are consistent with the mitigation of short sale constraints resulting from the option introduction, and that both the abnormal returns and short interest changes around listing dates can be predicted using ex ante characteristics of the underlying stock.read more
Citations
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Journal ArticleDOI
Short-Sale Strategies and Return Predictability
TL;DR: This paper examined short selling in US stocks based on new SEC-mandated data for 2005 and found that short sellers increase their trading following positive returns and correctly predict future negative abnormal returns.
Journal ArticleDOI
Which Shorts are Informed
TL;DR: In this paper, the authors construct a long daily panel of short sales using proprietary NYSE order data, showing that short sellers are quite well-informed and are important contributors to efficient stock prices.
Journal ArticleDOI
Which Shorts Are Informed
TL;DR: The authors constructed a long daily panel of short sales using proprietary NYSE order data from 2000 to 2004 and found that short sellers are well informed and are important contributors to efficient stock prices.
Journal ArticleDOI
Stocks are Special Too: An Analysis of the Equity Lending Market
TL;DR: In this article, the authors measure the effect of actual short-selling costs and constraints on trading strategies that involve short selling and find the loans of initial public offering (IPO), DotCom, large-cap, growth and low-momentum stocks to be cheap relative to the strategies' documented profits.
Journal ArticleDOI
Efficiency and the Bear: Short Sales and Markets Around the World
TL;DR: In this paper, the authors analyze cross-sectional and time-series information from 46 equity markets around the world to consider whether short sales restrictions affect the efficiency of the market and the distributional characteristics of returns to individual stocks and market indices.
References
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Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
Journal ArticleDOI
Using daily stock returns: The case of event studies
TL;DR: In this paper, the authors examine properties of daily stock returns and how the particular characteristics of these data affect event study methodologies and show that recognition of autocorrelation in daily excess returns and changes in their variance conditional on an event can sometimes be advantageous.
Journal ArticleDOI
Risk Aversion in the Small and in the Large
TL;DR: In this article, a measure of risk aversion in the small, the risk premium or insurance premium for an arbitrary risk, and a natural concept of decreasing risk aversion are discussed and related to one another.
Journal ArticleDOI
Risk, uncertainty, and divergence of opinion
TL;DR: In this paper, the authors explore the implications of a market with restricted short selling in which investors have differing estimates of the returns from investing in a risky security, and explain the very low returns on the stocks in the highest risk classes, the poor long run results on new issues of stocks, the presence of discounts from net value for closed end investment companies, and the lower than predicted rates of return for stocks with high systematic risk.
Book ChapterDOI
Risk aversion in the small and in the large
TL;DR: In this paper, a measure of risk aversion in the small, the risk premium or insurance premium for an arbitrary risk, and a natural concept of decreasing risk aversion are discussed and related to one another.