This study examines the proper risk proxy for an equity index. For each of nine indexes, an implied volatility index (VI) is computed from its options. For each, it determines whether the indexes’ return is explained better by the contemporaneous change in its own VI or that for a broader...

This paper investigates the relation between returns on stock indices and their corresponding futures contracts in order to evaluate potential explanations for the pervasive yet anomalous evidence of positive, short-horizon portfolio autocorrelations. Using a simple theoretical framework, we...

While there is a vast amount of research on IPOs, little research has been done from the point of view of index funds and the excess return opportunity from buying IPOs before the index inclusion date. In this paper, we analyse U.S. listed IPOs, between 2010 and 2018, which were added to the...

Equity option markets exhibit intense trading activity. We use the variability of option implied volatility spread as a proxy for the impounding of new information, and changes in the interpretation of existing information, into option prices. Over the 2006 – 2016 period, we find that the...

In this study, we separately estimate the implied volatility from bid prices and ask prices ofdeep out-of-the-money (OTM) put options on the S&P500 index. We find that the impliedvolatility of ask prices has stronger stock return predictability than that of bid prices. Our finding is robust to...

This article uses Bates's (1991) measure of the relative prices of out-of-the-money S&P 500 Index options as a measure of risk-neutral (RN) skewness, and shows that it is a statistically significant predictor of the next day's S&P 500 return across a number of specifications. A typical...