Stock price response to S&P 500 index inclusions : Do options listings and options trading volume matter?

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

1 Scopus Citations
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Author(s)

  • Yangyang Chen
  • Constantine Koutsantony
  • Cameron Truong
  • Madhu Veeraraghavan

Detail(s)

Original languageEnglish
Pages (from-to)379-401
Journal / PublicationJournal of International Financial Markets, Institutions and Money
Volume23
Online published29 Oct 2012
Publication statusPublished - Feb 2013
Externally publishedYes

Abstract

This study investigates the stock price response to Standard & Poor's (S&P) 500 index inclusions during the period 1996–2010 and the role of options listings and options trading volume with regard to the information content of index inclusion announcements. Specifically, we address the following questions: (1) Is the magnitude of abnormal returns from the announcements of S&P 500 inclusions significantly lower for stocks with options listings? and (2) Is the magnitude of abnormal returns from the announcements of S&P 500 inclusions significantly lower for stocks with a high level of options trading volume? Our findings indicate that options listings themselves are not related to the magnitude of abnormal returns from the announcements of S&P 500 inclusions. We also find that greater levels of options trading volume do not convey private information about the S&P 500 index changes. We document that any measurable impact of options trading on the stock price response to S&P 500 inclusion announcements lies primarily in the level of abnormal options trading volume in the period immediately preceding the announcements.

Research Area(s)

  • S&P 500 index, Options trading volume, Options listing informational efficiency

Citation Format(s)

Stock price response to S&P 500 index inclusions : Do options listings and options trading volume matter? / Chen, Yangyang; Koutsantony, Constantine; Truong, Cameron ; Veeraraghavan, Madhu.

In: Journal of International Financial Markets, Institutions and Money, Vol. 23, 02.2013, p. 379-401.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review