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How Do Exchanges Select Stocks for Option Listing?
Author(s) -
Mayhew Stewart,
Mihov Vassil
Publication year - 2004
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.1540-6261.2004.00638.x
Subject(s) - volatility (finance) , endogeneity , capitalization , econometrics , financial economics , listing (finance) , business , economics , market capitalization , cross listing , monetary economics , finance , stock market , geography , corporate governance , linguistics , philosophy , context (archaeology) , archaeology
We investigate the factors influencing the selection of stocks for option listing. Exchanges tend to list options on stocks with high trading volume, volatility, and market capitalization, but the relative effect of these factors has changed over time as markets have evolved. We observe a shift from volume toward volatility after the moratorium on new listings ended in 1980. Using control sample methodology designed to correct for the endogeneity of option listing, we find no evidence that volatility declines with option introduction, in contrast to previous studies that do not use control samples.