Complete markets, informed trading and equity option introductions

Robert Faff*, David Hillier

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

26 Citations (Scopus)


This paper proposes and tests a new hypothesis concerning the price impact of option introductions on the underlying asset. We argue that the leverage properties of options induce a higher level of informed trading in the aggregate market (underlying plus derivative), resulting in excess listing-day price movements in the newly optioned equity. Using an alternative dataset, our results suggest that this may be an explanation for the observed positive than negative excess listing-day returns of US optioned stocks over the past thirty years.

Original languageEnglish
Pages (from-to)1359-1384
Number of pages26
JournalJournal of Banking and Finance
Issue number6
Publication statusPublished - Jun 2005
Externally publishedYes


Dive into the research topics of 'Complete markets, informed trading and equity option introductions'. Together they form a unique fingerprint.

Cite this