The Effect of Option Listing on Return Momentum and Reversal

• 발행기관: People & Global Business Association
• 저자명: Joel N Morse Hoang H Nguyen Chih Hsien (Jerry) Yu
• 간행물 정보: 『Global Business and Finance Review』Vol.16 No.1, 16~30쪽, 전체 15쪽
• 주제분류: 경제경영 > 경영학
• 파일형태: PDF
• 발행일자: 2011.06.30

영문 초록

Momentum studies examine short-term return continuations and long-term return reversals in various capital market environments. In this paper, we examine the informational impact of option listing on momentum strategies. We find that within a 12-month period, the profitability of momentum strategies is higher for stocks with options than those without options. Moreover, during a three-year window, stocks without listed options exhibit significant reversals in momentum return, while those that have options show no reliable evidence of reversal. When we examine the effect of risk, we document that the reversal pattern appears strongest for a subsample of stocks characterized by both small capitalization and high volatility. Our findings support the information-based proposition that option availability improves market efficiency and hence reduces investors' overreaction during the short-term momentum cycle. As a result, long-run return reversal declines. Our paper also provides new evidence supporting behavioral models related to the momentum phenomenon.

목차

Abstract

Ⅰ. Introduction

Ⅱ. Data and Methodology

Ⅲ. Empirical Results

Ⅳ. Conclusions

References