The Effects of Asymmetric Information on the Adoption of Equity Options
Speaker
Abstract
| We investigate the previously unexplored effects of asymmetric information on the adoption process of new equity options introduced into the market. We use a microstructure model to estimate measures of informational asymmetries. Surprisingly, we find that high informational asymmetries in the year prior to option listings produce high option adoptions. Additionally, we show that option introductions decrease asymmetric information. Moreover, we report that option bid-ask spreads have low initial levels with a tendency to increase over time, which is unexpected since the introduced options are characterized by a high initial illiquidity; however they can be explained by asymmetric information outcomes. |
| Contact information: |
| Myra Lissenberg |
