The role of implied volatility in liquidity provision
Abstract
This article examines the informational volatility – the permanent component of volatility that is driven by information – and its effect on stock liquidity provision. Using option-implied volatility as a proxy for informational volatility, our results show it has a significant negative influence on liquidity provision prior to earnings announcement even after controlling for trade-related market conditions. We find the effect of informational...
Paper Details
Title
The role of implied volatility in liquidity provision
Published Date
Apr 16, 2019
Volume
45
Issue
1
Pages
45 - 71
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