Index options open interest and stock market returns

Seo, Sung Won; Byun, Suk Joon; Kim, Jun Sik

doi:10.1002/fut.22095

“…Although a change in the bank rate usually takes time, around 12 months, to have a widespread economic impact, central banks keep a vigilant watch on stock market with its immediate re-sponse to a change. To observe stock markets, stock index is capable of a suitable proxy (Seo, Byun, & Kim, 2020). As a measure of a number of stock price statistics, stock index typically measures the performance of a basket of securities intended to replicate a certain area of the market and hence reflects the overall price level of the stock market and its changing trend.…”

Section: Interest Rate and Stock Indexmentioning

confidence: 99%

Interest Rate Adjustment and Stock Market – The Case Study of China

Zeng¹,

Li²

2021

International Scientific Conference EMAN – Economics and Management: How to Cope With Disrupted Times

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This paper examines the impact of interest rate adjustment on the stock market in China. We collect the interest rate adjustment periods from April 21, 1991 to October 24, 2015 since the estab¬lishment of the stock market. Through an Error Correction model together with Granger causality, we investigate responses of the stock index to interest rate adjustment. Our findings suggest that there is existing a long-term reverse relationship between interest rate adjustment and stock index. The impact of interest rate adjustment on stock index returns could not be long-term disequilibria, which will be corrected in short-time. Also, the interest rate is the granger cause of the stock price index, while the stock price index is not the granger cause of interest rate.

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“…Future stock market returns are significantly correlated with the expansion of index options open interest. The empirical results show that there is a strong link between the rise in open interest for out-of-the-money call options and the possible returns from the stock market [4]. PCR, a popular information ratio measured by volume and open interest, is used to forecast market return at various time scales [5].…”

Section: Introduction To Options and Open Interestmentioning

confidence: 99%

A Bibliometric Study of Emerging Trends in The Equity Options Segment

2023

JMTCM

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Index options and stock options are part of equity options segment in particular and the equity derivatives segment in general. This study examines the evolution of index options and stock options as modern financial instruments along with open interest. 759 studies were reviewed from 1982 to 2022. The equity options market informational content is particularly helpful in forecasting future prices. As a result, it is a favourite of traders and short-term investors, but this subject needs more research. The study used a bibliometric and network analysis tool to identify the most cited studies, leading journals, and authors. The thematic structure of research on equity options and open interest has been inferred using the bibliometric analyses in this review paper. With the help of the Scopus database, the results have been summarized, covering the broad topics of volatility, options and option prices, stochastic models, financial markets and stock markets, hedging, Granger causality, price determination, model test, information asymmetry, equity and the VIX index. During this review study, researchers found that day traders and short-term investors can use the information in open interest, index options, and stock options to predict future prices.

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“…Future stock market returns are significantly correlated with the expansion of index options open interest. The empirical results show that there is a strong link between the rise in open interest for out-of-the-money call options and the possible returns from the stock market [4]. PCR, a popular information ratio measured by volume and open interest, is used to forecast market return at various time scales [5].…”

Section: Introduction To Options and Open Interestmentioning

confidence: 99%

Untitled

2023

JMTCM

0

View full text Add to dashboard Cite

Index options and stock options are part of equity options segment in particular and the equity derivatives segment in general. This study examines the evolution of index options and stock options as modern financial instruments along with open interest. 759 studies were reviewed from 1982 to 2022. The equity options market informational content is particularly helpful in forecasting future prices. As a result, it is a favourite of traders and short-term investors, but this subject needs more research. The study used a bibliometric and network analysis tool to identify the most cited studies, leading journals, and authors. The thematic structure of research on equity options and open interest has been inferred using the bibliometric analyses in this review paper. With the help of the Scopus database, the results have been summarized, covering the broad topics of volatility, options and option prices, stochastic models, financial markets and stock markets, hedging, Granger causality, price determination, model test, information asymmetry, equity and the VIX index. During this review study, researchers found that day traders and short-term investors can use the information in open interest, index options, and stock options to predict future prices.

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Index options open interest and stock market returns

Cited by 5 publications

References 61 publications

Interest Rate Adjustment and Stock Market – The Case Study of China

Interest Rate Adjustment and Stock Market – The Case Study of China

A Bibliometric Study of Emerging Trends in The Equity Options Segment

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