Essays in Market Microstructure

The first essay investigates whether there is an informational linkage between option trading activities and underlying stock depths. I find that option trading activities and underlying stock depths are informative for predicting each other, indicating that a linkage does exist. I further find that underlying stock depths beyond best prices contain more information than same-side depths at best prices for predicting future option trading activities, which is corroborated by my additional finding that institutional investors are more likely to place underlying stock limit orders less aggressively than individual investors. My findings indicate that standing underlying stock limit orders play an important role in price discovery between options and underlying stock markets.The second essay empirically examines whether specialists face adverse selection and evaluates the performance of the six measures of adverse selection or trade informativeness. I find that specialists face adverse selection. I find that the Glosten-Harris (1988) measure is the most reliable, that the Huang-Stoll (1997) measure is the least reliable, and that the ranking among the George-Kaul-Nimalendran (1991), Lin-Sanger-Booth (1995), PIN (1996), and Hasbrouck (1991b) measures is ambiguous.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Management

Grantor dc:publisher

The University of Arizona.

Year dc:date.issued

2009

Author dc:creator

• Wang, Qin

Advisor dc:contributor.advisor

• Lamoureux, Christopher G.

Committee members dc:contributor.committeemember

• Dyl, Edward A.
• Jiang, George
• Oaxaca, Ronald L.

• Management

Statement dc:rights

• Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.

Language dc:language.iso

EN

Handle dc:identifier.uri

http://hdl.handle.net/10150/195100

OAI identifier oai:identifier

oai:repository.arizona.edu:10150/195100