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The Intraday Relation between NYSE and CBOE Prices
Author(s) -
Hatch Brian C.
Publication year - 2003
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/1475-6803.00047
Subject(s) - volatility (finance) , economics , financial economics , price discovery , econometrics , implied volatility , stock (firearms) , volatility smile , monetary economics , futures contract , mechanical engineering , engineering
I extend the literature regarding price discovery across stock and option markets through an empirical model that allows information to flow through an error‐correction term and volatility. NYSE prices tend to lead CBOE prices by at least thirty minutes over the entire six‐year sample period. In addition, informed trading in the options market is revealed more strongly through persistence in volatility and the spillover of volatility to the stock market than it is through returns.