Hostname: page-component-586b7cd67f-dlnhk Total loading time: 0 Render date: 2024-12-03T19:35:13.918Z Has data issue: false hasContentIssue false
  • English
  • Français

Price Changes of Related Securities: The Case of Call Options and Stocks

Published online by Cambridge University Press:  06 April 2009

Mihir Bhattacharya
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper tests the hypothesis that option prices contain information not reflected in contemporaneous stock prices. An options transactions data base is used for the purpose. The evidence suggests that the magnitude of anticipation of stock prices by option prices is insufficient to overcome the bid/ask spread for intra-day holding periods. Implications of the profits in the overnight-holding periods are discussed.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 22 , Issue 1 , March 1987 , pp. 1 - 15
Copyright
Copyright © School of Business Administration, University of Washington 1987

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Beckers, S. “Standard Deviations Implied in Option Prices as Predictors of Future Stock Price Variability.” Journal of Banking and Finance, 5 (09 1981), 363–382.CrossRefGoogle Scholar
[2]Bhattacharya, M., and Rubinstein, M.. “Berkeley Options Data Base: Users Manual.” Unpublished: Berkeley (1978).Google Scholar
[3]Bhattacharya, M., and Rubinstein, M. “Transactions Data Tests of Efficiency of the Chicago Board Options Exchange.” Journal of Financial Economics, 12 (08 1983), 161–185.CrossRefGoogle Scholar
[4]Black, F., and Scholes, M.. “The Pricing of Options and Corporate Liabilities.” Journal of Political Economy, 81 (05–06 1973), 637–659.Google Scholar
[5]Box, G., and Wilson, K.. “On the Experimental Attainment of Optimum Conditions.” Journal of the Royal Statistical Society (Series B), 13 (1951), 1–45.Google Scholar
[6]Garbade, K., and Lieber, Z.. “On the Independence of Transactions of The New York Stock Exchange.” Journal of Banking and Finance, 1 (10 1977), 151–172.CrossRefGoogle Scholar
[7]Gastineau, G.Stock Options Manual. NY: McGraw-Hill (1975).Google Scholar
[8]Geske, R., and Roll, R.. “On Valuing American Call Options with the Black-Scholes European Formula.’ Journal of Finance, 39 (06 1984), 443–455.Google Scholar
[9]Latane, H., and Rendleman, R. Jr, “Standard Deviation of Stock Prices.” Journal of Finance, 31 (05 1976), 369–381.CrossRefGoogle Scholar
[10]MacBeth, J., and Merville, L.. “An Empirical Examination of the Black-Scholes Call Option Pricing Model.” Journal of Finance, 34 (12 1979), 1173–1186.Google Scholar
[11]Manaster, S., and Rendleman, R. Jr, “Option Prices as Predictors of Equilibrium Stock Prices.” Journal of Finance, 37 (09 1982), 1043–1057.CrossRefGoogle Scholar
[12]Merton, R. “Theory of Rational Option Pricing.” The Bell Journal of Economics and Management Science, 4 (Spring 1973), 141–183.CrossRefGoogle Scholar
[13]Panton, D. “Chicago Board Call Options as Predictors of Common Stock Price Changes.” Journal of Econometrics, 4 (01 1976), 101–113.CrossRefGoogle Scholar
[14]Patell, J., and Wolfson, M.. “Anticipated Information Releases Reflected in Call Option Prices.” Journal of Accounting and Economics, 1 (08 1979), 117–140.CrossRefGoogle Scholar
[15]Phillips, S., and Smith, C. Jr, “Trading Costs for Listed Options: The Implications for Market Efficiency.” Journal of Financial Economics, 8 (06 1980), 179–201.CrossRefGoogle Scholar
[16]The Wall Street Journal (04 26, 1984).Google Scholar