| This paper measures the impact of option introductions on the return variance of underling
stocks. Past research generally finds a significant reduction in stock return variance
following the listing of options through 1986. Using a more extensive sample, I compare changes
in the return variance of optioned stocks to changes in the return variance of a control group.
Since the average change in the control group is statistically indistinguishable from the average
change in the optioned stocks, I conclude that option introductions do not significantly affect
stock return variance. |