Option Characteristics as Cross-sectional Predictors

Andreas Neuhierl, Xiaoxiao Tang, Rasmus T. Varneskov, Guofu Zhou

Publikation: KonferencebidragKonferenceabstrakt til konferenceForskningpeer review

Abstract

We provide the first comprehensive analysis of option information for pricing the cross-section of stock returns by jointly examining extensive sets of firm and option characteristics. Using portfolio sorts and high-dimensional methods, we show that certain option measures have significant predictive power, even after controlling for firm characteristics, earning a Fama-French three-factor alpha in excess of 20% per annum. Our analysis further reveals that the strongest option characteristics are associated with information about asset mispricing and future tail return realizations. Our findings are consistent with models of informed trading and limits to arbitrage.
OriginalsprogEngelsk
Publikationsdato2023
StatusUdgivet - 2023
BegivenhedASSA 2023 Annual Meeting - Hilton Riverside, New Orleans, USA
Varighed: 6 jan. 20238 jan. 2023
https://www.aeaweb.org/conference/2023

Konference

KonferenceASSA 2023 Annual Meeting
LokationHilton Riverside
Land/OmrådeUSA
ByNew Orleans
Periode06/01/202308/01/2023
Internetadresse

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