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| Author: | Roll, R. Schwartz, E. Subrahmanyam, A. |
| Title: | Options trading activity and firm valuation |
| Journal: | Journal of Financial Economics
2009 : DEC, VOL 94:3, p. 345-360 |
| Index terms: | options trading volumes company value derivative securities |
| Language: | eng |
| Abstract: | It is argued in this article that in active option markets, where trading volumes are high, options can stimulate informed trades and therefore influence the firm value. By examining option trading data, the authors find that companies with higher option trade volumes possess also higher value of Tobin's q and the value of corporate investment seems to be more sensitive to stock price changes. Furthermore, for companies with stocks that show greater information asymmetry, the volume of option trading is found to have a stronger effect on the value of the firm. |
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