How Do Exchanges Select Stocks for Option Listing?

We investigate the factors influencing the selection of stocks for option listing. Exchanges tend to list options on stocks with high trading volume, volatility, and market capitalization, but the relative effect of these factors has changed over time as markets have evolved. We observe a shift from...

Full description

Saved in:
Bibliographic Details
Published in:The Journal of finance (New York) 2004-02, Vol.59 (1), p.447-471
Main Authors: Mayhew, Stewart, Mihov, Vassil
Format: Article
Language:English
Subjects:
Arithmetic mean
Decision analysis
Hypotheses
Market capitalization
New stock market listings
Options contracts
Options markets
Options trading
Securities and Exchange Commission regulation
Shareholders
Statistical analysis
Statistical variance
Stock exchanges
Stock options
Studies
Volatility
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We investigate the factors influencing the selection of stocks for option listing. Exchanges tend to list options on stocks with high trading volume, volatility, and market capitalization, but the relative effect of these factors has changed over time as markets have evolved. We observe a shift from volume toward volatility after the moratorium on new listings ended in 1980. Using control sample methodology designed to correct for the endogeneity of option listing, we find no evidence that volatility declines with option introduction, in contrast to previous studies that do not use control samples.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.2004.00638.x