Why Do Option Introductions Depress Stock Prices? A Study of Diminishing Short Sale

@inproceedings{Danielsen2001WhyDO,
  title={Why Do Option Introductions Depress Stock Prices? A Study of Diminishing Short Sale},
  author={Bartley R. Danielsen and Sorin M. Sorescu},
  year={2001}
}
Early studies find that option introductions tend to raise the price of underlying stocks. More recent research indicates that post-1980 option introductions are associated with negative abnormal returns in underlying stocks. Other studies document increased short sale activities following option listing. This paper provides evidence that the documented abnormal returns and changes in short interest around option listings are consistent with the mitigation of short sale constraints resulting… CONTINUE READING

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