The Role of the Options Market in the Dissemination of Private Information

Authors

Timothy D. Cairney, Georgia Southern UniversityFollow
Judith Swisher, Western Michigan University

Document Type

Article

Publication Date

9-2004

Publication Title

Journal of Business Finance and Accounting

DOI

10.1111/j.0306-686X.2004.00565.x

ISSN

1468-5957

Abstract

This paper examines the role the options market plays in the dissemination of private information. We find abnormal volume in the options market for three days prior to management forecasts, controlling for concurrent equity volume. Classifying trades as long or short, we find more informed options volume relative to equity volume (1) with relatively greater options market liquidity; (2) when equity is listed on the NYSE or AMEX; (3) for larger surprises; (4) with fewer analysts; (5) for shorter times between the forecast and period end; (6) for good news forecasts; and (7) for smaller percentage institutional holdings.

Recommended Citation

Cairney, Timothy D., Judith Swisher. 2004. "The Role of the Options Market in the Dissemination of Private Information." Journal of Business Finance and Accounting, 31 (7-8): 1015-1042. doi: 10.1111/j.0306-686X.2004.00565.x
https://digitalcommons.georgiasouthern.edu/account-facpubs/67