Persistent Link:
http://hdl.handle.net/10150/325212
Title:
Price Discovery Across Option and Equity Prices
Author:
Kane, Hayden
Issue Date:
2014
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
This paper measures the channels by which private information is incorporated in prices in the equity and option markets. Using a mispricing events approach and conditioning on the option market being the cause of the mispricing event, I analyse the subsequent behaviour of both the options and equity markets and I find that options markets play an important role in the price discovery process. When conditioning on option caused mispricing events, the equity price adjusts towards the options price to reconcile the prices. I find that around 40% of the option caused mispricing events contain information, and the equity prices adjust 35-40%, depending on the exchange, of the maximum discrepancy before prices reconcile. When the equity market causes the mispricing, the option market follows due to the autoquote mechanism. Additionally, I use Monte Carlo to assess the suitability of the Hasbrouck (1995) Information Share and Gonzalo-Granger (1995) Component Share measures in the option-equity context. I find that neither metric is suitable, however the Putnins (2013) Information Leadership metric is and the options market has on average a 35% information leadership share.
Type:
text; Electronic Dissertation
Keywords:
Market Microstructure; Price Discovery; Put-Call Parity; Management; Equity Options
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Graduate College; Management
Degree Grantor:
University of Arizona
Advisor:
Lamoureux, Christopher

Full metadata record

DC FieldValue Language
dc.language.isoen_USen
dc.titlePrice Discovery Across Option and Equity Pricesen_US
dc.creatorKane, Haydenen_US
dc.contributor.authorKane, Haydenen_US
dc.date.issued2014-
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractThis paper measures the channels by which private information is incorporated in prices in the equity and option markets. Using a mispricing events approach and conditioning on the option market being the cause of the mispricing event, I analyse the subsequent behaviour of both the options and equity markets and I find that options markets play an important role in the price discovery process. When conditioning on option caused mispricing events, the equity price adjusts towards the options price to reconcile the prices. I find that around 40% of the option caused mispricing events contain information, and the equity prices adjust 35-40%, depending on the exchange, of the maximum discrepancy before prices reconcile. When the equity market causes the mispricing, the option market follows due to the autoquote mechanism. Additionally, I use Monte Carlo to assess the suitability of the Hasbrouck (1995) Information Share and Gonzalo-Granger (1995) Component Share measures in the option-equity context. I find that neither metric is suitable, however the Putnins (2013) Information Leadership metric is and the options market has on average a 35% information leadership share.en_US
dc.typetexten
dc.typeElectronic Dissertationen
dc.subjectMarket Microstructureen_US
dc.subjectPrice Discoveryen_US
dc.subjectPut-Call Parityen_US
dc.subjectManagementen_US
dc.subjectEquity Optionsen_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.disciplineManagementen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.advisorLamoureux, Christopheren_US
dc.contributor.committeememberLamoureux, Christopheren_US
dc.contributor.committeememberSias, Richarden_US
dc.contributor.committeememberKelley, Ericen_US
dc.contributor.committeememberHirano, Keisukeen_US
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