Journal article
Potential Biases from Using Only Trade Prices of Related Securities on Different Exchanges: A Comment
The Journal of finance (New York), Vol.43(4), pp.1049-1055
09/01/1988
DOI: 10.1111/j.1540-6261.1988.tb02623.x
Abstract
A bias associated with the bid-ask spread and nonsynchronous trading may lead some to believe that option prices contain information not reflected in the contemporaneous stock prices even when the 2 prices are in equilibrium. Many more during-the-day option trades occur at the ask than at the bid, while the distribution is approximately symmetric for stocks. A probable implication is that the option trade prices, and, as a result, the stock prices, are upward-biased estimates of corresponding true prices. Analysis shows that trade prices in general and day-end trade prices in particular may not be sufficient for investigating whether option prices contain information not contained in stock prices. The data used in the analysis consist of every reported quote and trade for equity options traded on the Chicago Board Options Exchange (CBOE) for September and October 1976 and for options on the CBOE and the corresponding stocks on the New York Stock Exchange for March and April 1985.
Details
- Title: Subtitle
- Potential Biases from Using Only Trade Prices of Related Securities on Different Exchanges: A Comment
- Creators
- Anand Vijh
- Resource Type
- Journal article
- Publication Details
- The Journal of finance (New York), Vol.43(4), pp.1049-1055
- Publisher
- Blackwell Publishers Inc
- DOI
- 10.1111/j.1540-6261.1988.tb02623.x
- ISSN
- 0022-1082
- eISSN
- 1540-6261
- Language
- English
- Date published
- 09/01/1988
- Academic Unit
- Finance
- Record Identifier
- 9984380639302771
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