The Destabilizing Effects of ETFs and Options on Underlying Stock Returns
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CitationZhang, William. 2015. The Destabilizing Effects of ETFs and Options on Underlying Stock Returns. Bachelor's thesis, Harvard College.
AbstractThis paper explores the role that ETFs and options have on the underlying stock return. Using a dataset of 400 stocks over a five year period, I examine the effect that ETF rebalancing and option hedging have on stock returns. I find evidence that rebalancing demands for ETFs increase the volatility of the end-of-day returns of the constituent stocks. In addition, I conclude that options have a meaningful positive impact on the underlying stock's daily momentum. These results suggest that stock returns are destabilized by these two financial instruments.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:17417583
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