The interaction between trading volume of stocks and options: Some statistical evidence

Abstract

The finance literature provides several examples of research into the interaction between stock and option prices. This paper examines the feedback hypothesis for trading volume on the Amsterdam stock and options markets using a generalized Granger-Sims framework. The most important finding of this paper is that very often causality runs from options trade to the stock market which seems to support the feeling of the business profession and the main hypothesis of this paper. Statistically it is interesting that the results indicate very convincingly that the relations reveal no stability over time. (JEL C13, C52). © 1994.