Dividend Initiations, Information Content, Informed Trading in the Options Market and Stock Liquidity

2015 ◽  
Author(s):  
Balasingham Balachandran ◽  
Huu Nhan Duong ◽  
Michael Theobald ◽  
Yun (Tracy) Zhou
Keyword(s):  
Information Content ◽  
Informed Trading ◽  
Options Market ◽  
Stock Liquidity ◽  
Dividend Initiations

scholarly journals Predictability of OTC Option Volatility for Future Stock Volatility

2020 ◽  
Vol 12 (12) ◽  
pp. 5200
Author(s):  
Jungmu Kim ◽  
Yuen Jung Park
Keyword(s):  
Information Content ◽  
Unbiased Estimator ◽  
Implied Volatility ◽  
Realized Volatility ◽  
Stock Index ◽  
Options Market ◽  
Over The Counter ◽  
Index Options ◽  
Stock Volatility ◽  
Future Realized Volatility

This study explores the information content of the implied volatility inferred from stock index options in the over-the-counter (OTC) market, which has rarely been studied in the literature. Using OTC calls, puts, and straddles on the KOSPI 200 index, we find that implied volatility generally outperforms historical volatility in predicting future realized volatility, although it is not an unbiased estimator. The results are more apparent for options with shorter maturity. However, while implied volatility has strong predictability during normal periods, historical volatility is superior to implied volatility during a period of crisis due to the liquidity contraction of the OTC options market. This finding suggests that the OTC options market can play a role in conveying important information to predict future volatility.

Is User-Generated Twittersphere Activity Associated with Stock Market Reactions to 8-K Filings?

2021 ◽  
Author(s):  
ROGER DEBRECENY ◽  
Asheq Rahman ◽  
TAWEI WANG
Keyword(s):  
Information Content ◽  
Trading Volume ◽  
Abnormal Returns ◽  
Market Returns ◽  
Stock Valuation ◽  
Market Reactions ◽  
Stock Liquidity ◽  
Economic Significance ◽  
Corporate Announcements ◽  
Stock Market Reactions

Prior studies have demonstrated that company-generated tweets as a device for the dissemination of corporate announcements help reduce information asymmetry. This paper demonstrates that user-generated tweets around corporate announcements have information content in addition to the information content of the announcement itself. Using a sample of S&P 1500 firms, we test the effects of abnormal levels of user-generated tweets and abnormal sentiment in the tweets over the three days surrounding 8-K filings of unanticipated events on market returns and liquidity of stocks. Results show that abnormal levels of user-generated tweets are positively associated with both the absolute cumulative abnormal returns and cumulative abnormal trading volume. We also find an indication of a cautionary stance by the market when sentiment is negative around the announcements. Our results have economic significance from both the stock valuation and the stock liquidity perspectives.

Firm opacity and informed trading around spinoffs

2018 ◽  
Vol 19 (3) ◽  
pp. 262-276 ◽  
Author(s):  
Yuan Wen
Keyword(s):  
Stock Returns ◽  
Design Methodology ◽  
Informed Trading ◽  
Options Market ◽  
Organizational Complexity ◽  
Content Type ◽  
Abnormal Stock Returns ◽  
Options Trading ◽  
The Relationship ◽  
Corporate Spinoffs

Purpose This paper aims to examine the prevalence of informed trading around corporate spinoffs and the relation between firm opacity and informed trading using option market data. Design/methodology/approach The author investigates the prevalence of informed trading by examining the relationship between abnormal stock returns associated with spinoffs and the volatility spread/volatility skewness of options prior to the spinoffs. Furthermore, the author examines how opacity and organizational complexity prior to the spinoffs affect informed trading. Findings The study shows that option volatility spread and volatility skewness for the five days prior to the spinoffs can predict the abnormal stock returns on the spinoff announcement days, suggesting that there is informed trading in the options market prior to spinoffs. The study shows that informed trading is more prevalent for firms that are more opaque prior to the spinoff. Furthermore, informed trading decreases after spinoffs. Originality/value To the best of knowledge, this is the first empirical research that examines the prevalence of informed trading around spinoffs by using options volatility spread/skewness and the relation between firm opacity and informed options trading.

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