Options and Market Efficiency : A Big Data Approach

ISBN-13: 9786200532282 / Angielski / Miękka / 2020 / 88 str.

Rajeev R. Bhattacharya

Opis

I use five separate measures of deviation from Put-Call Parity of options on a stock without splits or dividends as separate negative measures for efficiency of the market ecosystem consisting of the underlying stock, derivatives, and risk-free securities. I develop a theory of trading volume as a function of short sales costs, dispersion of investor valuations, float, and transaction costs, and that of market efficiency as a function of trading volume and number of analysts covering the stock. I use Three-Stage Least Squares (3SLS) to estimate this structural system, separately for Nasdaq and non-Nasdaq U.S. stocks, over 1996-2015. I find, contrary to much previous theoretical and empirical work, that the impact of short sales costs & constraints on market efficiency is not significantly negative and that the impact of trading volume on market efficiency is not significantly positive.

O autorze

Bhattacharya, Rajeev R.
Professor Rajeev R. Bhattacharya, Ph.D., president of Washington Finance and Economics, is a finance professor at Johns Hopkins University and has served on the faculty of University of Maryland, Georgetown University, Washington University in St. Louis, and University of New South Wales. He specializes in finance, economics, and Big Data.