TY - JOUR
T1 - Stock price response to S&P 500 index inclusions
T2 - Do options listings and options trading volume matter?
AU - Chen, Yangyang
AU - Koutsantony, Constantine
AU - Truong, Cameron
AU - Veeraraghavan, Madhu
PY - 2013/2
Y1 - 2013/2
N2 - 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.
AB - 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.
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U2 - 10.1016/j.intfin.2012.09.008
DO - 10.1016/j.intfin.2012.09.008
M3 - Article
AN - SCOPUS:84870903120
SN - 1042-4431
VL - 23
SP - 379
EP - 401
JO - Journal of International Financial Markets, Institutions and Money
JF - Journal of International Financial Markets, Institutions and Money
IS - 1
ER -