Topic: Option Listing and Information Asymmetry

Speaker: Jianfeng Hu, Assistant Professor of Finance, Singapore Management University

Date: October 22nd, 2014 (Wed.)

Time: 12:10-1:10pm

Location: Building 1, Room 501, Faculty Lounge

Language: English

Abstract:

Under the assumption of options market makers’ full delta hedging, the stock order flow captures private information in both the stock and options markets. Between 2001 and 2010, US stocks with newly listed options experience average increases of 16.8% in informed trading and 27.8% in uninformed trading in the following year compared to control stocks with similar propensities of listing. The disproportional increments reduce the overall probability of informed trading by 11.5% for the listing stocks. Dynamic analysis confirms that these structural breaks occur exactly around the option listing date. Information in the order flow is incorporated more quickly into the stock price after option listing. Finally, the option introduction benefits are positively correlated with the options trading volume.

About the speaker:

Jianfeng Hu is an Assistant Professor of Finance at Singapore Management University. He received his Ph.D. in Finance from City University of New York in 2013. Professor Hu’s research interest focuses on Investment, empirical asset pricing, derivatives, risk management and market microstructure. His research has been published in Journal of Financial Economics, Review of Economic Studies and Journal of Derivatives .