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Equity Options and Underlying Stocks' Behavior: Further Evidence from Japan *
Author(s) -
LIU SHINHUA
Publication year - 2010
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/j.1468-2443.2010.01121.x
Subject(s) - equity (law) , volatility (finance) , financial economics , economics , monetary economics , equity risk , equity capital markets , stock price , business , finance , private equity , political science , law , paleontology , series (stratigraphy) , biology
In an incomplete market, introduction of options could affect the underlying stocks' market behavior. We further examine the various impacts of the advent of equity options, using a recent sample of equity options in Japan. We find that option listings in Japan lead to significant increases in price and volatility, relative to a control sample matched by probability of listing, despite that equity options were launched after the index options in Japan. We discuss the apparent differences in the price and volatility effects across the markets, and conclude that differences in regulatory environments might be responsible.