The Journal of Finance · 1993 · 218 citations · 8 references
BusinessEconomicsFinanceAsset PricingFinancial EconomicsFinancial MarketsArbitrage PricingOption PricingOption Pricing ModelsOptions MarketsStock MarketsStock OptionsBid-ask Spread AnalysisDelay EffectsLead-lag RelationsLead-lag RelationshipsOptions Market Microstructure
ABSTRACT While many studies find that option prices lead stock prices, Stephan and Whaley (1990) find that stocks lead options. We find no evidence that options, even deep out‐of‐the‐money options, lead stocks. After confirming Stephan and Whaley's results, we show their results can be explained as spurious leads induced by infrequent trading of options. We show that the stock lead disappears when the average of the bid and ask prices is used instead of transaction prices. Hence, we find no evidence of arbitrage opportunities associated with the stock lead.
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Continuous Auctions and Insider Trading
Albert S. Kyle · Econometrica · 1985 · 10K citations
Business, Economics, Auction Theory +12
Multivariate tests of financial models
Michael R. Gibbons · Journal of Financial Economics · 1982 · 626 citations
Option Prices as Predictors of Equilibrium Stock Prices
Steven Manaster, Richard J. Rendleman · The Journal of Finance · 1982 · 404 citations