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The contribution of frictions to expected returns

Hirakiy, Kazuhiro; Skiadopoulos, George - 2018

We derive a model-free option-based formula to estimate the contribution of market frictions to expected returns (CFER) within an asset pricing setting. We estimate CFER for the U.S. optionable stocks. We document that CFER is sizable, it predicts stock returns and it subsumes the effect of...

Persistent link: https://www.econbiz.de/10011932555

Learning and Forecasts about Option Returns through the Volatility Risk Premium

Bernales, Alejandro - 2019

We use learning in an equilibrium model to explain the puzzling predictive power of the volatility risk premium (VRP …

Persistent link: https://www.econbiz.de/10012892623

Option-implied information and predictability of extreme returns

Vilkovz, Grigory; Xiaox, Yan - 2013 - This version: January 28, 2013

We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...

Persistent link: https://www.econbiz.de/10010226098

Information content of aggregate implied volatility spread

Han, Bing; Li, Gang - In: Management science : journal of the Institute for … 67 (2021) 2, pp. 1249-1269

Persistent link: https://www.econbiz.de/10012505469

Why Do Price and Volatility Information from the Options Market Predict Stock Returns?

Muravyev, Dmitriy - 2020

The option implied volatility spread and skew predict stock returns. These variables also reflect the expected cost of … stock returns; however, the volatility spread and skew do not once this implied fee is considered. Results are similar for a … yet in stock prices. These findings indicate that the volatility spread and skew predict returns because they proxy for …

Persistent link: https://www.econbiz.de/10012855076

Implied volatility sentiment : a tale of two tails

Stork, Philip; Félix, Luiz; Kräussl, Roman - 2017

. We find that our implied volatility (IV) sentiment measure, jointly derived from index and single stock options, explains …

Persistent link: https://www.econbiz.de/10011583312

Implied volatility sentiment : a tale of two tails

Felix, Luiz; Kräussl, Roman; Stork, Philip - 2017

-neutral density. An implied volatility (IV) sentiment measure that is jointly derived from index and single stock options explains …

Persistent link: https://www.econbiz.de/10011587564

International Volatility Risk and Chinese Stock Return Predictability

Chen, Jian - 2017

This paper investigates the predictive ability of international volatility risk for the daily aggregate Chinese stock … market returns. We employ the innovations in implied volatility indices of seven major international markets as our … international volatility risk proxies. We find that international volatility risks are negatively associated with contemporaneous …

Persistent link: https://www.econbiz.de/10012972144

Predicting the equity market with option implied variables

Prokopczuk, Marcel; Tharann, Björn; Wese Simen, Chardin - 2017

We comprehensively analyze the predictive power of several option implied variables for monthly S & P 500 excess returns and realized variance. The correlation risk premium (CRP) emerges as a strong predictor of both excess returns and realized variance. This is true both in- and out-of-sample....

Persistent link: https://www.econbiz.de/10011751188

Information Content in Sneer Asymmetry : An Application to OOS Implied Volatility Forecasting

Choi, Youngsoo - 2012

The ad hoc Black-Scholes (AHBS) model is one of the most widely used option valuation models among practitioners models. The main contribution of this study is methodological. We have two main results: (1) we make the empirical observation that typically the call and put sneers are discontinuous...

Persistent link: https://www.econbiz.de/10013097543