The Effects of Newly Listed Derivatives in a Thin Stock Market

Authors: Bruand M.; Gibson-Asner R.

Source: Review of Derivatives Research, Volume 2, Number 1, 1998 , pp. 59-86(28)

Publisher: Springer

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Abstract:

This study examines the informational feedback effects associated to the listing and trading of derivatives in Switzerland. The observed changes in the price and higher moments of stock returns are representative of a thin stock market. The listing of stock options and index futures generated positive abnormal returns for large stocks and for the index while small stocks essentially benefited from the launching of index options. While reducing the variance of blue chips and of the index, their variance's stochasticity increased (decreased) at index options' (futures) listings. Finally, we detect significant stock and index derivatives' price leads which do not however generate arbitrage opportunities.

Keywords: options; futures; price dominance; non-redundancy; volatility

Language: English

Document Type: Regular paper

Affiliations: 1: Ecole des HEC, University of Lausanne, 1015 Lausanne, Switzerland

Publication date: 1998-01-01