This dissertation is structured as three essays on various aspects of equity option introduction. Topics addressed include the relative predictability of introduction, the relationship between predictability of introduction and the price effect associated with introduction, and a comparison of the price response of optioned versus nonoptioned stocks to changes in dividends. Essay 1 involves use of firm-specific variables in a LOGIT model to allow assignment of a probability of equity option introduction. Two samples were developed: one of firms that were optioned, the other of firms which met the objective standards but were not optioned. A LOGIT model is used to assign a probability of optioning to each firm. A holdout sample is used to test the out-of-sample predictive power of the model. Firms were correctly classified as optioned or nonoptioned in about 85 percent of cases. Various researchers have detected abnormal positive returns associated with stock option introduction. In an efficient market context, this would indicate that option introduction is "good" news to financial markets. If optioning is predictable, stocks with a higher probability of optioning would be expected to show less price response when options are introduced. In Essay 2, the relationship between the probability of optioning and abnormal returns is tested using a standard event methodology. Utilizing nonparametric statistics, no significant differences were detected among abnormal returns of portfolios formed on the basis of probability of option introduction. Essay 3 compares abnormal returns of optioned and nonoptioned stocks around announced dividend changes. Two samples were obtained. Firms in the first (second) sample had significant dividend changes while options were (were not) available on their stocks. Standard event methodology is used to compare price responses of the two samples. If the price response of optioned stocks is less pronounced than the price response of nonoptioned stocks, this may indicate that optioned stocks are more efficiently priced. Reasons for this increased efficiency are examined in the study. Abnormal returns for the optioned sample were not significantly different from zero. Those for the nonoptioned sample were significantly different from zero for all event windows tested.
| Identifer | oai:union.ndltd.org:unt.edu/info:ark/67531/metadc277764 |
| Date | 08 1900 |
| Creators | Ragle, William F. |
| Contributors | Tripathy, Niranjan, Brown, Robert William, Impson, Michael, Nieswiadomy, Michael L. |
| Publisher | University of North Texas |
| Source Sets | University of North Texas |
| Language | English |
| Detected Language | English |
| Type | Thesis or Dissertation |
| Format | iii, 96 leaves, Text |
| Rights | Public, Copyright, Copyright is held by the author, unless otherwise noted. All rights reserved., Ragle, William F. |
Page generated in 0.0021 seconds