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School of Business | Department of Finance | Finance | 2012
Thesis number: 13081
Trading volume and information asymmetries in index option markets: An empirical investigation
| Author: | Mehtäläinen, Antti |
| Title: | Trading volume and information asymmetries in index option markets: An empirical investigation |
| Year: | 2012 Language: eng |
| Department: | Department of Finance |
| Academic subject: | Finance |
| Index terms: | rahoitus; financing; tieto; knowledge; informaatio; information; optiot; option |
| Pages: | 48 |
| Full text: | |
| Key terms: | Trading volume; Information; Options |
| Abstract: |
Abstract
While the exploitation of the firm-specific private information via equity options is now well documented, relatively little is known about the existence and exploitation of market-wide private information. This thesis investigates the behavior of aggregate trading volume in the S&P 500 index, the S&P 500 ETF, and the VIX options preceding informational announcements and further considers whether these volume series have any predictive power over absolute returns of the S&P 500 index. Interestingly, the trading volume in all series appears to be abnormally high preceding important macroeconomic announcements and trading days associated with high absolute returns.
However, predictive regression and Granger causality test results indicate that only the volume of ETF options has statistically significant, although economically modest, predictive power over absolute returns of the S&P 500 index.
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