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Article: Informational Content of Options Trading on Acquirer Announcement Return

TitleInformational Content of Options Trading on Acquirer Announcement Return
Authors
Issue Date2015
PublisherCambridge University Press. The Journal's web site is located at http://journals.cambridge.org/action/displayJournal?jid=jfq
Citation
Journal of Financial and Quantitative Analysis, 2015, v. 50 n. 5, p. 1057-1082 How to Cite?
AbstractThis study examines the informational content of options trading on acquirer announcement returns. We show that implied volatility spread predicts positively on the cumulative abnormal return (CAR), and implied volatility skew predicts negatively on the CAR. The predictability is much stronger around actual merger and acquisition (M&A) announcement days, compared with pseudo-event days. The prediction is weaker if pre-M&A stock price has incorporated part of the information, but stronger if acquirer’s options trading is more liquid. Finally, we find that higher relative trading volume of options to stock predicts higher absolute CARs. The relation also exists among the target firms.
Persistent Identifierhttp://hdl.handle.net/10722/199291
ISSN
2015 Impact Factor: 1.628
2015 SCImago Journal Rankings: 2.998
SSRN

 

DC FieldValueLanguage
dc.contributor.authorChan, K-
dc.contributor.authorGe, L-
dc.contributor.authorLin, TC-
dc.date.accessioned2014-07-22T01:11:27Z-
dc.date.available2014-07-22T01:11:27Z-
dc.date.issued2015-
dc.identifier.citationJournal of Financial and Quantitative Analysis, 2015, v. 50 n. 5, p. 1057-1082-
dc.identifier.issn0022-1090-
dc.identifier.urihttp://hdl.handle.net/10722/199291-
dc.description.abstractThis study examines the informational content of options trading on acquirer announcement returns. We show that implied volatility spread predicts positively on the cumulative abnormal return (CAR), and implied volatility skew predicts negatively on the CAR. The predictability is much stronger around actual merger and acquisition (M&A) announcement days, compared with pseudo-event days. The prediction is weaker if pre-M&A stock price has incorporated part of the information, but stronger if acquirer’s options trading is more liquid. Finally, we find that higher relative trading volume of options to stock predicts higher absolute CARs. The relation also exists among the target firms.-
dc.languageeng-
dc.publisherCambridge University Press. The Journal's web site is located at http://journals.cambridge.org/action/displayJournal?jid=jfq-
dc.relation.ispartofJournal of Financial and Quantitative Analysis-
dc.rightsJournal of Financial and Quantitative Analysis. Copyright © Cambridge University Press.-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.titleInformational Content of Options Trading on Acquirer Announcement Return-
dc.typeArticle-
dc.identifier.emailLin, TC: chunlin@hku.hk-
dc.identifier.authorityLin, TC=rp01077-
dc.description.naturepostprint-
dc.identifier.doi10.1017/S0022109015000484-
dc.identifier.hkuros231199-
dc.identifier.volume50-
dc.identifier.issue5-
dc.identifier.spage1057-
dc.identifier.epage1082-
dc.publisher.placeUnited Kingdom-
dc.identifier.ssrn2293748-

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