Effect of stock basket trading on the liquidity of underlying stocks: Evidence from a market with short-sale constraints

2021 ◽  
Author(s):  
Son Duy Pham ◽  
Hung Xuan Do ◽  
Thao Thac Thanh Nguyen
Keyword(s):  
Short Sale Constraints ◽  
Short Sale ◽  
Underlying Stocks

Deviations from Put-Call Parity and Stock Return Predictability

2010 ◽  
Vol 45 (2) ◽  
pp. 335-367 ◽  
Author(s):  
Martijn Cremers ◽  
David Weinbaum
Keyword(s):  
Stock Returns ◽  
Implied Volatility ◽  
Option Prices ◽  
Stock Return Predictability ◽  
Put Options ◽  
Short Sale Constraints ◽  
Short Sale ◽  
The Difference ◽  
Underlying Stocks ◽  
Abnormal Performance

AbstractDeviations from put-call parity contain information about future stock returns. Using the difference in implied volatility between pairs of call and put options to measure these deviations, we find that stocks with relatively expensive calls outperform stocks with relatively expensive puts by 50 basis points per week. We find both positive abnormal performance in stocks with relatively expensive calls and negative abnormal performance in stocks with relatively expensive puts, which cannot be explained by short sale constraints. Rebate rates from the stock lending market directly confirm that our findings are not driven by stocks that are hard to borrow. The degree of predictability is larger when option liquidity is high and stock liquidity low, while there is little predictability when the opposite is true. Controlling for size, option prices are more likely to deviate from strict put-call parity when underlying stocks face more information risk. The degree of predictability decreases over the sample period. Our results are consistent with mispricing during the earlier years of the study, with a gradual reduction of the mispricing over time.

Short Selling ADRs and Foreign Market Short-Sale Constraints

2010 ◽  
Author(s):  
Benjamin M. Blau ◽  
Richard S. Warr ◽  
Robert A. Van Ness
Keyword(s):  
Foreign Market ◽  
Short Selling ◽  
Short Sale Constraints ◽  
Short Sale
Sign in / Sign up

Export Citation Format

Share Document