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

Published online by Cambridge University Press:  06 April 2009

Mihir Bhattacharya
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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

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References

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