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Commonality in equity options liquidity: Evidence from NYSE LIFFE

Verousis, Thanos, ap Gwilym, Owain, Voukelatos, Nikolaos (2016) Commonality in equity options liquidity: Evidence from NYSE LIFFE. European Journal of Finance, 22 (12). ISSN 1351-847X. E-ISSN 1466-4364. (doi:10.1080/1351847X.2016.1188836)

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Official URL
http://dx.doi.org/10.1080/1351847X.2016.1188836

Abstract

This paper examines the commonality in liquidity for individual equity options trading at NYSE LIFFE. We use high-frequency data to construct a novel index of liquidity commonality and we find that it can explain a substantial proportion of the liquidity variation of individual options. The explanatory power of the common liquidity factor is more pronounced during periods of higher implied volatility at the market level. The common factor’s impact on individual options’ liquidity is found to depend on the options’ idiosyncratic characteristics, while there is limited evidence of systematic liquidity spillover effects among the NYSE LIFFE exchanges.

Item Type: Article
DOI/Identification number: 10.1080/1351847X.2016.1188836
Uncontrolled keywords: LIFFE; options; commonality; liquidity; bid-ask spread;
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Nikolaos Voukelatos
Date Deposited: 06 Apr 2016 07:19 UTC
Last Modified: 29 May 2019 17:10 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/54804 (The current URI for this page, for reference purposes)
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