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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

Predictable Stock Returns, Transaction Costs, and the (Un)Informativeness of Option Prices

Goncalves-Pinto, Luis - 2020

We show that option prices predict future stock returns only when stock returns are ex-ante predictable using public signals from the stock market itself. Directional option trading cannot explain these results, suggesting that they are not driven by informed trading or superior ability of...

Persistent link: https://www.econbiz.de/10012855271

A Smiling Bear in the Equity Options Market and the Cross-Section of Stock Returns

Park, Hye-hyun - 2018

We propose a measure for the convexity of an option-implied volatility curve, IV convexity, as a forward-looking measure of excess tail-risk contribution to the perceived variance of underlying equity returns. Using equity options data for individual U.S.-listed stocks during 2000-2013, we find...

Persistent link: https://www.econbiz.de/10012937123

Stock Illiquidity, option prices, and option returns

Kanne, Stefan; Korn, Olaf; Uhrig-Homburg, Marliese - 2016 - Current version: July 2016

We provide evidence of a strong effect of the underlying stock's illiquidity on option prices by showing that the average absolute difference between historical and implied volatility increases with stock illiquidity. This pattern translates into significant excess returns of option trading...

Persistent link: https://www.econbiz.de/10011539242

Option price implied information and REIT returns

Cao, Jie; Han, Bing; Song, Linjia; Zhan, Xintong - 2021

Option-based measures can predict underlying stock returns, due to differences in price discovery and price pressure effects between options and underlying stocks. We investigate stock return predictability by various option price-based measures using REITs. REITs are more transparent and...

Persistent link: https://www.econbiz.de/10012593737

Aggregate implied volatility spread and stock market returns

Han, Bing; Li, Gang - 2017 - Current Version: September 2017

Aggregate implied volatility spread (IVS), defined as the cross-sectional average difference in the implied volatilities of at-the-money call and put equity options, is significantly and positively related to future stock market returns at daily, weekly, monthly, to semiannual horizons. This...

Persistent link: https://www.econbiz.de/10011897782

Technical trading revisited : false discoveries, persistence tests, and transaction costs

Bajgrowicz, Pierre; Scaillet, Olivier - 2009 - This version: Sept. 2009

We revisit the apparent historical success of technical trading rules on daily prices of the DJIA index from 1897 to 2011, and use the False Discovery Rate as a new approach to data snooping. The advantage of the FDR over existing methods is that it selects more outperforming rules which allows...

Persistent link: https://www.econbiz.de/10003961414

Accounting Anomalies and Fundamental Analysis : A Review of Recent Research Advances

Richardson, Scott A. - 2011

We survey recent research in accounting anomalies and fundamental analysis. We use forecasting of future earnings and … accounting information. We combine this with opinions from the academic and practitioner communities to critically evaluate key … clusters of papers about accounting anomalies and fundamental analysis disseminated over the last decade. Finally, we provide a …

Persistent link: https://www.econbiz.de/10013130106

Accounting-Based Valuation and Predictability of Stock Market Returns : A Re-Examination

Fang, Jing - 2019

Using monthly data from 01/1985 to 12/2012, we find that the accounting valuation-based predictor introduced in Lee … the accounting valuation-based predictor does not suffer the problem of instable in-sample and poor out … the accounting valuation-based predictor, suggesting that the accounting valuation-based predictor carries information not …

Persistent link: https://www.econbiz.de/10014103309

Why Do Options Prices Predict Stock Returns?

Lin, Tse-Chun - 2014

We use a new approach to assess the information transmission between options and stock markets. We study whether the predictive power of option-implied volatilities (IVs) on stock returns lies in analyst-related and/or earnings-related news. We find that two proxies for options trading (IV skew...

Persistent link: https://www.econbiz.de/10013058159

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