Skip Navigation

This Article
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (17)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Brennan, M. J.
Right arrow Articles by Cao, H. H.
Right arrow Search for Related Content
Related Collections
Right arrow G12 - Asset Pricing
Right arrow G14 - Information and Market Efficiency; Event Studies
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

Rev Fin 1996; 9:163-208
© 1996 the Society for Financial Studies

Article

Information, trade, and derivative securities

MJ Brennan and HH Cao
Correspondence: MJ Brennan, Anderson Graduate School of Management, UCLA, Los Angeles, CA 90024, USA

Abstract

Hellwig's (1980) model is used to analyze the value of improving trading opportunities by more frequent trading in the underlying asset, or by trading in a derivative asset. With multiple trading sessions, uninformed investors behave as rational trend followers, while more informed investors follow a contrarian strategy. As trading becomes continuous, Pareto efficiency is achieved. With trading in an appropriate derivative security, Pareto efficiency may be achieved in only a single round of trading. All derivative claims are then priced on Black and Scholes (1973) principles and, in the absence of further supply shocks, no trading will take place in subsequent trading rounds.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 REV FINANC STUDHome page
H. H. Cao and H. Ou-Yang
Differences of Opinion of Public Information and Speculative Trading in Stocks and Options
Rev. Financ. Stud., March 27, 2008; (2008) hhn020v1.
[Abstract] [Full Text] [PDF]

Home page
 REV FINANC STUDHome page
J. Pan and A. M. Poteshman
The Information in Option Volume for Future Stock Prices
Rev. Financ. Stud., September 1, 2006; 19(3): 871 - 908.
[Abstract] [Full Text] [PDF]

Home page
 REV FINANC STUDHome page
J. M. Vanden
Options Trading and the CAPM
Rev. Financ. Stud., January 1, 2004; 17(1): 207 - 238.
[Abstract] [Full Text] [PDF]


Disclaimer:
Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.