Illiquidity Premia in the Equity Options Market
UNIVERSITY OF TECHNOLOGY, SYDNEY
Finance Discipline Group
Research Seminars in Finance
Topic: Illiquidity Premia in the Equity Options Market
Speaker: Ruslan Goyenko, McGill University and University of Toronto
Illiquidity is well-known to be a signi cant determinant of stock and bond returns. We are the rst to report on illiquidity premia in equity option markets using a large cross-section of rms. An increase in option illiquidity decreases the current option price and predicts higher expected delta-hedged option returns. This e¤ect is statistically and economically signi cant, and it is consistent with existing evidence that market makers in the equity options market hold net long positions. The illiquidity premium is robust across puts and calls, moneyness levels, as well as across di¤erent empirical approaches. It is also robust when controlling for various rm-speci c variables, including standard measures of illiquidity of the underlying stock.
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A light lunch will be provided in the Staff Room at 1.00 p.m. Please RSVP for catering purposes by accepting this meeting request.
Date: Wednesday, 2nd April 2014
Time: 12.00 p.m. – 1.00 p.m.
Venue: University of Technology, Sydney
Building 5, D Block, Level 3, Room 3.01
1 - 59 Quay Street, Haymarket
Co-ordinator: Jianxin Wang (Ph: +61 2 9514 9744)