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Commonality in equity options liquidity: evidence from European Markets

Verousis, Thanos and ap Gwilym, Owain and Voukelatos, Nikolaos (2016) 'Commonality in equity options liquidity: evidence from European Markets.' The European Journal of Finance, 22 (12). 1204 - 1223. ISSN 1351-847X

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Abstract

This paper examines commonality in liquidity for individual equity options trading in European markets. We use high-frequency data to construct a novel index of liquidity commonality. The approach is able to explain a substantial proportion of the liquidity variation across individual options. The explanatory power of the common liquidity factor is more pronounced during periods of higher market-wide implied volatility. The common factor's impact on individual options' liquidity depends on options' idiosyncratic characteristics. There is some evidence of systematic liquidity spillover effects across these European exchanges.

Item Type: Article
Uncontrolled Keywords: options, commonality, liquidity, bid-ask spread
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 15 Mar 2019 14:40
Last Modified: 15 Mar 2019 15:15
URI: http://repository.essex.ac.uk/id/eprint/24176

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