The informational role of thin options markets: Empirical evidence from the Spanish case

  • C. José García Martín University of Valencia
  • Begoña Herrero Piqueras University of Valencia
  • Ana María Ibañez Escribano University of Valencia

Abstract

This study investigates the informational role of thin options markets, specifically the Spanish options market. Firstly, we examine the effect of options markets by analysing stock market reaction to earnings news, conditional on the availability of options markets. Secondly, we examine options trading activity before the release of earnings news (including the announcement period). The results show that the impact on prices before the earnings release is significantly bigger when options trading is available. Moreover, the dissemination of earnings news is associated with significant unusual activity in the options market due to informed trading, especially when the earnings surprise is highly good.
Keywords options market, thin market, informed trading, price discovery process, earnings announcement
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How to Cite
García Martín, C., Herrero Piqueras, B., & Ibañez Escribano, A. (2016). The informational role of thin options markets: Empirical evidence from the Spanish case. Estudios de Economía, 43(2), pp. 233-263. Retrieved from https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/44118/46130
Section
Articles
Published
2016-11-21