Information content of order imbalance in the index options market

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buir.contributor.authorŞensoy, Ahmet
buir.contributor.authorOmole, John
buir.contributor.orcidŞensoy, Ahmet|0000-0001-7967-5171
buir.contributor.orcidOmole, John|0000-0002-6135-9039
dc.citation.epage432en_US
dc.citation.spage418en_US
dc.citation.volumeNumber78en_US
dc.contributor.authorŞensoy, Ahmet
dc.contributor.authorOmole, John
dc.date.accessioned2023-02-17T10:01:11Z
dc.date.available2023-02-17T10:01:11Z
dc.date.issued2021-12-12
dc.departmentDepartment of Managementen_US
dc.description.abstractWe use proprietary transaction level data of Borsa Istanbul to compute the order imbalance of index options in order to investigate the linkages between option trades and spot index returns. Our findings show that weeks with higher call (put) order imbalance are associated with higher (lower) contemporaneous spot index returns. In addition, higher call order imbalance significantly predicts negative next-week index returns. The spot index return predictability by call options is absorbed neither by the stock order imbalance nor the index futures imbalance. Indeed, this predictability is consistent with the view that the hedging demand of counterparties in the option market that leads to the transfer of order imbalance from option market to stock market is the driver of predictability. Results are robust after controlling for various factors.en_US
dc.embargo.release2023-12-12
dc.identifier.doi10.1016/j.iref.2021.11.006en_US
dc.identifier.eissn1873-8036
dc.identifier.issn1059-0560
dc.identifier.urihttp://hdl.handle.net/11693/111491
dc.language.isoEnglishen_US
dc.publisherElsevier BVen_US
dc.relation.isversionofhttps://doi.org/10.1016/j.iref.2021.11.006en_US
dc.source.titleInternational Review of Economics & Financeen_US
dc.subjectDerivativesen_US
dc.subjectIndex optionsen_US
dc.subjectOrder imbalanceen_US
dc.subjectInformed tradingen_US
dc.subjectDelta hedgingen_US
dc.subjectBorsa Istanbulen_US
dc.titleInformation content of order imbalance in the index options marketen_US
dc.typeArticleen_US

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