Informed Trading in the Stock Market and Option-Price Discovery

Autor:	Vyacheslav Fos, Pierre Collin-Dufresne, Dmitriy Muravyev
Rok vydání:	2020
Předmět:	Economics and Econometrics Schedule 050208 finance 05 social sciences Sample (statistics) Monetary economics Implied volatility Market maker Shareholder Accounting 0502 economics and business Common knowledge Economics Stock market 050207 economics Volatility (finance) Finance
Zdroj:	Journal of Financial and Quantitative Analysis. 56:1945-1984
ISSN:	1756-6916 0022-1090
DOI:	10.1017/s0022109020000629
Popis:	When activist shareholders file Schedule 13D filings, the average stock-price volatility drops by approximately 10%. Prior to filing days, volatility information is reflected in option prices. Using a comprehensive sample of trades by Schedule 13D filers that reveals on what days and in what markets they trade, we show that on days when activists accumulate shares, option-implied volatility decreases, implied volatility skew increases, and implied volatility time slope increases. The evidence is consistent with a theoretical model where it is common knowledge that informed trading occurs only in the stock market and market makers update option prices based on stock-price and order-flow dynamics.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::2e3deb3d064c63d855c7205cebbf3d64 https://doi.org/10.1017/s0022109020000629 Zobrazit plný text záznamu