RESEARCH

Publications




Working Papers


We examine the link between retail trading in options and the volatility of the underlying assets. Using Robinhood's introduction of options as a shock to retail trading, we confirm that option volume increased around this event and show that volatility similarly increased for: interlisted US securities, relative to their Canadian counterparts; optioned shares relative to optionless shares for firms with dual class shares; and more so for shares that would be become more attractive to retail traders as a result of the fee change (relatively high stock prices or low option prices). We provide further evidence suggesting the effect is permanent and that the underlying mechanism is related to market makers hedging their option exposure: volatility increases more for shares with higher option-embedded leverage; spreads and price impacts are lower; market maker volumes increase; and the volatility of retail option volume increases. Our results suggest that a shift in retail trading toward options drives an increase in the volatility of the optioned securities due to that actions of market makers hedging their exposure.

Presentations: FMA Annual Meeting (2023), NFA Annual Meeting (2023), Derivatives and Asset Pricing Conference (2023)

Winner, Best Paper Award in Market Microstructure at the FMA annual meeting (2023)


Does the informational interdependence among countries affect market quality? Guided by theoretical literature, this paper examines international information flow disruptions as a source of financial market frictions. Using non-overlapping holidays as a novel identification method, I find that disruptions in foreign information inflow result in the deterioration of domestic market liquidity and fairness. I document evidence indicating that liquidity worsens through both the information asymmetry surge and the manipulative trading channels, while fairness worsens through only the latter channel. Furthermore, intraday volatility increases via both channels. Additional analyses show that an increase in international trade strengthens the information asymmetry surge channel and that a stock exchange upgrade weakens the manipulative trading channel. These findings suggest that international information flow is important to financial market quality.

Presentations: FMA Annual Meeting (2022)

Semifinalist, Best Paper Award in Market Microstructure at the FMA annual meeting (2022)



Works in Progress