We find that short sale costs eliminate the abnormal profits generated by asset pricing anomalies. While many anomalies persist out-of-sample, they cannot be profitably exploited due to stock borrow fees. Using a comprehensive sample of 162 anomalies, we show that the average of these long-short...

The option implied volatility spread and skew predict stock returns. These variables also reflect the expected cost of borrowing stock to sell short. The stock borrowing fee implied from options prices predicts changes in quoted borrowing fees and stock returns; however, the volatility spread...

We use data on signed option volume to study which components of option volume predict stock returns and resolve the seemingly inconsistent results in the literature. We find no evidence that trades related to synthetic short positions in the underlying stocks contain more information than...

I show that the inventory risk faced by market-makers has a first-order effect on option prices. I introduce a simple approach that decomposes the price impact of trades into inventory risk and asymmetric information components. While both components are large for option trades, the inventory...

Do order flows in index derivatives play an informational role? Weekly index put order flow on the International Securities Exchange positively and robustly predicts weekly S&P 500 index returns. This result obtains mainly for net put buying and is stronger in high VIX periods and in periods...