Philip Brown Prize for Best Australian Paper 2020

Using new empirical measures of information leadership, the paper finds that the role of options in price discovery is up to five times larger than previously thought. Approximately one-quarter of new information is reflected in options prices before being transmitted to stock prices, with options playing a more important role in price discovery around information events. Using unique data on traders prosecuted for insider trading, the authors find that they often choose to trade in options, attracted by their leverage, & when they do the options share of price discovery is higher. The results help interpret conflicting findings in the existing literature. Paper Here: https://doi.org/10.1016/j.finmar.2019.100524