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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
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Implied Volatility Spreads and Expected Market Returns
Atilgan, Yigit - 2015
This paper investigates the intertemporal relation between volatility spreads and expected returns on the aggregate … stock market. We provide evidence for a significantly negative link between volatility spreads and expected returns at the … extreme values. The intertemporal relation remains strongly negative after controlling for conditional volatility, variance …
Persistent link: https://www.econbiz.de/10013037279
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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
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The Contribution of Frictions to Expected Returns
Hiraki, Kazuhiro - 2020
We document that properly scaled deviations from put-call parity estimate the contribution of market frictions to expected returns (CFER) accurately, by means of a non-parametric theoretically founded identification strategy. The required conditions are that our estimator predicts the underlying...
Persistent link: https://www.econbiz.de/10012852972
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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
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Implied Volatility Spreads and Expected Market Returns
Atilgan, Yigit - 2015
This paper investigates the intertemporal relation between volatility spreads and expected returns on the aggregate … stock market. We provide evidence for a signi ficantly negative link between volatility spreads and expected returns at the … extreme values. The intertemporal relation remains strongly negative after controlling for conditional volatility, variance …
Persistent link: https://www.econbiz.de/10013038211
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International Stock Return Predictability : The Role of U.S. Volatility Risk
Deng, Yizhe; Jiang, Fuwei; Wang, Yunqi; Zhou, Ti - 2022
This paper studies the intertemporal relation between U.S. volatility risk and international equity risk premia. We … show that a common volatility risk factor constructed from the option-implied U.S. forward variances positively and … robust to the inclusion of existing domestic and U.S. predictors and alternative U.S. volatility risk proxies. The …
Persistent link: https://www.econbiz.de/10014236052
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Unlocking ESG premium from options
Cao, Jie; Goyal, Amit; Zhan, Xintong; Zhang, Weiming Elaine - 2021
to hedge jump risks, but not volatility risks. The effect of ESG performance is more prominent during the periods when …
Persistent link: https://www.econbiz.de/10012593635
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The contribution of transaction costs to expected stock returns : a novel measure
Hiraki, Kazuhiro; Skiadopoulos, George - 2023
We document that a theoretically founded, real-time, and easy-to-implement option-based measure, termed synthetic-stock difference (SSD), accurately estimates the part of stock's expected return arising from stock's transaction costs. We calculate SSD for U.S. optionable stocks. SSD can be more...
Persistent link: https://www.econbiz.de/10014231634
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The equity premium and the volatility spread : the role of risk-neutral skewness
Feunou, Bruno; Fontaine, Jean-Sébastien; Tedongap, Roméo - 2009
conditioning on skewness increases the predictive power of the volatility spread and that coefficient estimates accord with theory … of the volatility spread to skewness. We measure skewness from option prices and test these predictions. We find that … the term structure of option-implied volatility, skewness and kurtosis and find that time-dependence in returns has a …
Persistent link: https://www.econbiz.de/10003852916