Retail clientele and option returns
Does the retail clientele matter for option returns? By delta-hedging options and trading straddles, thus allowing a focus on volatility, this paper empirically shows that a higher retail trading proportion (RTP) is related to lower option returns. Long-short portfolios involving options on low and high RTP stocks generate significantly positive abnormal returns. The results suggest that retail investors speculate and pay a lottery premium on the expected future volatility, resulting in more expensive options with higher implied volatilities.
Year of publication: |
2015
|
---|---|
Authors: | Choy, Siu-Kai |
Published in: |
Journal of Banking & Finance. - Elsevier, ISSN 0378-4266. - Vol. 51.2015, C, p. 26-42
|
Publisher: |
Elsevier |
Subject: | Delta-hedged option returns | Lottery premium | Retail investors | Speculation |
Saved in:
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