Market Migration: Informed Short Sales and Option Introductions
28 Pages Posted: 8 Apr 2010
Date Written: April 7, 2010
Abstract
This study tests the hypothesis that informed shorting activity decreases in the stock market when options become available because informed traders migrate from the stock market to the options market after options are introduced. To the contrary, we do not find that shorting activity decreases. Instead shorting activity increases after options list. Furthermore, we show that the common negative relation between current short selling and future returns becomes stronger after options are introduced. This result appears to be driven by stocks that are most likely to face binding short-sale constraints. Contrary to the idea that informed traders migrate to the options market, findings in this paper indicate that informed short selling increases after options become available.
Keywords: short selling, Information, Market Migration
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Short Sale Constraints and Stock Returns
By Charles M. Jones and Owen A. Lamont
-
Short Sale Constraints and Stock Returns
By Charles M. Jones and Owen A. Lamont
-
Breadth of Ownership and Stock Returns
By Joseph Chen, Harrison G. Hong, ...
-
Breadth of Ownership and Stock Returns
By Joseph Chen, Harrison G. Hong, ...
-
Can the Market Add and Subtract? Mispricing in Tech Stock Carve-Outs
By Owen A. Lamont and Richard H. Thaler
-
Can the Market Add and Subtract? Mispricing in Tech Stock Carve-Outs
By Owen A. Lamont and Richard H. Thaler
-
Limited Arbitrage in Equity Markets
By Mark L. Mitchell, Todd C. Pulvino, ...
-
Dotcom Mania: The Rise and Fall of Internet Stock Prices
By Eli Ofek and Matthew P. Richardson
-
Dotcom Mania: The Rise and Fall of Internet Stock Prices
By Eli Ofek
-
Dotcom Mania: The Rise and Fall of Internet Stock Prices
By Eli Ofek and Matthew P. Richardson