The Impact of Option Contract and Embedded Equity Put Option on ‎the Synchronicity of Stock Return/s Considering the Moderating Role of ‎Financial Leverage and Using Difference-in-Difference Approach

Derivative instruments are regarded as a basic need of investors and portfolio ‎managers in the capital market, whereby they can cover their portfolio risk ‎from price fluctuations. Among the derivative instruments, index-based derivative instruments are a ‎type of instruments that allow investors to insure against systemic risk. ‎ This function is particularly necessary for encouraging foreign investors to invest ‎in a highly volatile country. ‎ These functions have been the source of the highly significant trading of these ‎instruments in reputable stock exchanges. ‎ Therefore, this study examines the impact of trading authority and ‎subordinate sales authority on the synchronization of stock returns by ‎considering the moderating role of financial leverage and using the Difference-in-‎Difference approach. A sample of ۱۱۲ companies from Tehran Stock Exchange was ‎selected using the sampling method.‎ This research was conducted in Tehran Stock Exchange for the period ‎۲۰۱۳-۲۰۱۸.‎ The statistical method used in this research is “Difference-in-Difference”. The results of this study showed that: ۱) The decrease in stock price ‎synchronization for companies that issued embedded equity put option was ‎more than the companies that issued options contracts; .۲) The fall in stock ‎price synchronicity occurs more rapidly in companies that issued ‎embedded equity put options and with higher trading leverage ratios.

Keywords:

Derivative Financial Instruments , Contract Option , Embedded equity Put Option , ‎Stock Return Syncroncity , Difference-in-Difference Approach