The Information Content Of Net Buying Pressure

In my study,this paper firstly combed the existing related literature on stocks and derivatives information trading.Through reading domestic and foreign literature,this paper summarizes current research status of information trade.As the development of stock market is more mature,the research on information trading in financial market was first concentrated in the stock market.And in recent years,it has gradually transferred to the derivative market.So this article combs the domestic and foreign literature information from the stock market to the derivatives market and the net purchase of pressure of option market step by step to complete the literature review.Through combing the existing literature,I got the research direction and content of the enlightenment.And it also provide a more comprehensive literature review for the subsequent information transactions.Secondly,this paper makes a detailed analysis of the theory of net purchase pressure and put forward the research hypothesis.According to the net purchase pressure hypothesis proposed in the existing literature,it can be divided into the limited arbitrage hypothesis,the direction information learning hypothesis and the volatility information learning hypothesis.Based on limited arbitrage hypothesis,the option's supply curve is an upward sloping curve,and the supply curve is upward sloping because the market makers and other arbitrageurs' limited arbitrage behavior.Because the market makers are risk averse and mark-to-market system could make them at risk of forced settlement,they also hedge the positions when provide liquidity for the market.But they will face model risk,parameter estimation and discrete hedge risk,etc.in the process of hedge,so they will ask for higher risk compensation on demand pressure from traders due to the limits of arbitrage.According to study direction information hypothesis,because there is information asymmetry in the market,if there are direction information traders on the market,their behavior will imply the direction of future changes in the underlying assets,market makers judge the direction of the implicit information according to the information traders' trading behavior,and according to the direction information to adjust the option price,resulting in influence of buying pressure on the implied volatility.Under volatility information learning hypothesis,the volatility traders have private information about the volatility of underlying assets.Volatility information traders will adjust the call option and put option positions in advance,so market-makers adjust the option price so as to determine the implied volatility according to volatility information traders' trading behavior.so the trading behavior of volatility information traders will affect implied volatility.Finally,based on the theory of net buying pressure,I select the Shanghai 50 ETF option data to establish empirical model of testing Chinese option market information transaction and analyze the empirical results.In the research of this paper,I draws on Bollen and Whaley(2004),Kang and Park(2008)and zhen-long zheng(2014)'s research methods,and the method is improved in my paper.I weaves the detailed market transaction data into high frequency data of five minutes,test the market of Chinese Shanghai 50 ETF option creatively,obtained the conclusion of information trading in Chinese option market.According to the report,the empirical results find that the selected samples during the period of the Shanghai 50 ETF option exists information traders on the market,and information trading is given priority to volatility information trading,but also contains a small amount of the direction information trading.Besides,the correlation analysis of different types of options' net buying pressure as well as the impact of net buying pressure on the stock index returns direction also confirmed the test results of the empirical model.In addition,this paper also reports the results during the stock crash.Compared with the whole sample period,volatility information trading is more apparent during the crash,and the transfer of information is more quickly.Compared to the past research of Bollen and Whaley(2004),Kang and Park(2008),zhen-long zheng(2014),my innovation points are as follows:first of all,the past studies are mainly concentrated in mature capital market such as Europe and the United States,the study of emerging markets in the asia-pacific region is confined to a few article of South Korea and Taiwan.For there are huge differences in investment structure and investors behavior between emerging markets and mature markets,even inside the asia-pacific region,the research object of this article is the Chinese mainland market.Through the research of Chinese information trading,we can see the information trading behavior in emerging markets.Secondly,because the transmission of information is rapid,we build a five-minute high frequency net purchase pressure index based on detailed transaction data and transaction indicators,and use high-frequency data for information testing.The research of this paper indicates that there exists information transaction in Chinese option market and the type of information transaction is verified through the empirical data of Shanghai 50ETF.The results can be provide reference for investors and regulators in the financial markets.Regulators and investors using the theory of this paper,the net purchase of pressure can be judged for information on the options market in China,so as to formulate the corresponding strategy.