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  • Stock price response to S&P 500 index inclusions: Do options listings and options trading volume matter?

    Author(s)
    Chen, Yangyang
    Koutsantony, Constantine
    Truong, Cameron
    Veeraraghavan, Madhu
    Griffith University Author(s)
    Veeraraghavan, Madhu
    Year published
    2013
    Metadata
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    Abstract
    This study investigates the stock price response to Standard & Poor's (S&P) 500 index inclusions during the period 1996–2010 and the role of options listings and options trading volume with regard to the information content of index inclusion announcements. Specifically, we address the following questions: (1) Is the magnitude of abnormal returns from the announcements of S&P 500 inclusions significantly lower for stocks with options listings? and (2) Is the magnitude of abnormal returns from the announcements of S&P 500 inclusions significantly lower for stocks with a high level of options trading volume? Our findings ...
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    This study investigates the stock price response to Standard & Poor's (S&P) 500 index inclusions during the period 1996–2010 and the role of options listings and options trading volume with regard to the information content of index inclusion announcements. Specifically, we address the following questions: (1) Is the magnitude of abnormal returns from the announcements of S&P 500 inclusions significantly lower for stocks with options listings? and (2) Is the magnitude of abnormal returns from the announcements of S&P 500 inclusions significantly lower for stocks with a high level of options trading volume? Our findings indicate that options listings themselves are not related to the magnitude of abnormal returns from the announcements of S&P 500 inclusions. We also find that greater levels of options trading volume do not convey private information about the S&P 500 index changes. We document that any measurable impact of options trading on the stock price response to S&P 500 inclusion announcements lies primarily in the level of abnormal options trading volume in the period immediately preceding the announcements.
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    Journal Title
    Journal of International Financial Markets, Institutions and Money
    Volume
    23
    Issue
    1
    DOI
    https://doi.org/10.1016/j.intfin.2012.09.008
    Subject
    Banking, Finance and Investment not elsewhere classified
    Applied Economics
    Banking, Finance and Investment
    Publication URI
    http://hdl.handle.net/10072/172411
    Collection
    • Journal articles

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