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The Price Effect of Option Introduction
Author(s) -
CONRAD JENNIFER
Publication year - 1989
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1989.tb05068.x
Subject(s) - economics , volatility (finance) , financial economics , sample (material) , price level , monetary economics , econometrics , chemistry , chromatography
This paper examines the price effect of option introduction from 1974 to 1980. The introduction of individual options causes a permanent price increase in the underlying security, beginning approximately three days before introduction. The price effect appears to be associated with introduction, and not announcement, throughout the sample period. Excess returns volatility declines with option introduction. Systematic risk is unchanged. There is a positive relation between the price increase and a measure of activity in the options market.