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The Risk Return Relationship : Evidence from Index Returns and Realised Variances

Yang, Minxian - 2020

This paper provides new evidence on the risk return relationship by jointly analysing index return and realised variance (RV) series. It is argued that the contemporaneous correlation (CC) between the return and RV, which has been largely overlooked in the literature, is a crucial component in...

Persistent link: https://www.econbiz.de/10012848134

Why Does Option Volume Predict Stock Returns? The Role of Investor Disagreement and Mispriced Stocks

Hameed, Allaudeen - 2020

-based option volume on returns on mispriced stocks concentrates in highly levered options and when it is costly to short the stocks …. Beyond the well-documented role of informed trading in options, our evidence suggests that intense trading in options also …

Persistent link: https://www.econbiz.de/10012851265

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

Multivariate Distributions for Financial Returns

Madan, Dilip B. - 2020

Multivariate return distributions consistent with bilateral gamma marginals are formulated and termed multivariate bilateral gamma (MBG). Tail probability distances and Wasserstein Distances between return data, model simulations and their squares evaluate model performance. A full Gaussian...

Persistent link: https://www.econbiz.de/10012834626

Two Centuries of Commodity Futures Premia : Momentum, Value and Basis

Geczy, Christopher - 2019

Using hand-collected data of commodity futures contracts going back to 1877, we replicate in the pre-sample history the well-documented cross-sectional commodity factor premia of momentum, value and basis. All three premia remain significantly positive in the additional 80-plus years of...

Persistent link: https://www.econbiz.de/10012892589

Yields versus Expected Returns of Corporate Bonds : Some Unexpected Results

Beliaeva, Natalia A. - 2019

We derive expected bond return equations for various structural credit valuation models with alternative stochastic processes and boundary conditions for default given in Merton [1974], Merton [1976], Black and Cox [1976], Heston [1993], Longstaff and Schwartz [1995], and Collin-Dufresne and...

Persistent link: https://www.econbiz.de/10012900804

Being Right is Not Enough : Buying Options to Bet on Higher Realized Volatility

Israelov, Roni - 2018

Speculators who wish to bet on higher future volatility often purchase options to “go long volatility.” Should … investors who buy options expect to profit when realized volatility increases? If so, under what conditions? To answer these … questions, we conduct an analysis of the relationship between long volatility performance (buying options) and contemporaneous …

Persistent link: https://www.econbiz.de/10012911343

Returns of Claims on the Upside and the Viability of U-Shaped Pricing Kernels

Bakshi, Gurdip S. - 2018

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

Persistent link: https://www.econbiz.de/10012940716

Investor Sentiment Dynamics, the Cross-Section of Stock Returns and the MAX Effect

Cheema, Muhammad A. - 2018

Recent evidence shows that investor sentiment is a contrarian predictor of stock returns with speculative stocks earning lower (higher) future returns than safe stocks following high (low) sentiment states. We extend this argument by conditioning expected stock returns on sentiment dynamics and...

Persistent link: https://www.econbiz.de/10012932843

Portfolio Theory for Squared Returns Correlated Across Time

Eberlein, Ernst - 2016

modeling permits access to skewness via randomized drifts. Optimal portfolios maximize a conservative market value seen as a …

Persistent link: https://www.econbiz.de/10013004140