Premium
THE CROSS‐SECTIONAL EFFECTS OF OPTION LISTING ON FIRM STOCK RETURN VARIANCES
Author(s) -
Niendorf Bruce D.,
Peterson David R.
Publication year - 1996
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/j.1475-6803.1996.tb00228.x
Subject(s) - econometrics , variance (accounting) , listing (finance) , cross listing , stock (firearms) , economics , financial economics , business , accounting , finance , corporate governance , mechanical engineering , engineering
We develop a set of hypotheses to explain cross‐sectional differences in variance changes associated with option listing. Transactions variance is decomposed into three components: the bid‐ask spread, return autocorrelations, and intrinsic variance. Each is investigated separately. We find support for hypotheses that link: (1) changes in dealer transactions costs to changes in the bid‐ask spread following option listing; (2) changes in the quantity and quality of information and the value of new information to movements of the return autocorrelation structure toward zero; and (3) changes in trading volume and the clientele that trades the underlying security to changes in intrinsic variance following option listing.