Motivated by the theory of demand-based option pricing in imperfect markets, we examine the relation between short-sale constraints and equity option returns, conditional on the level of mis-pricing in the underlying stock. We report a monotonic relation between various measures of short-sales...

This paper improves continuous-time variance swap approximation formulas to derive exact returns on benchmark VIX option portfolios. The new methodology preserves the variance swap interpretation that decomposes returns into realized variance and option implied-variance.We apply this new...

We show that options written on stocks with low prices are over-priced. This effect is robust to a variety of tests, controlling for common stock- and option- risk characteristics, and to reasonable transaction costs. Natural experiments corroborate this finding; options tend to become...

Using the next-day and next-week returns of stocks in the Korean market, we examine the association of option volume ratios - i.e. the option-to-stock (O/S) ratio, which is the total volume of put options and call options scaled by total underlying equity volume, and the put-call (P/C) ratio,...

This study employs option-price data to back out the implied cross-sectional return variance in the G10 currencies. It investigates the relation of implied cross-sectional return dispersion in the currency market and subsequent realized cross-sectional return dispersion. We find that implied...

We investigate the use of the normalized imbalance between option volumes corresponding to positive and negative market views, as a predictor for directional price movements in the spot market. Via a nonlinear analysis, and using a decomposition of aggregated volumes into five distinct market...

We document profitable cross-sectional and time-series momentum in a broad set of 56 option factors constructed from monthly sorts on daily delta-hedged option positions. Option factor returns are highly autocorrelated, but momentum profits of strategies with longer formation periods are mainly...

We study whether ESG ratings can predict stock returns in China. We find marginal evidence that stocks with higher ESG ratings have lower future returns. In addition, we explore the cross-sectional and time-series heterogeneities of the relationship between ESG and stock returns. We find the...

Do more active hedge fund managing strategies generate higher returns than the less active ones? We develop a novel approach to measuring activeness for hedge funds by estimating the dynamics of risk exposure of a large sample of live and dead equity long-short funds. We find that higher...

Using the monthly data for more than 1700 Australian stocks over the period from 1990 to 2009, we investigate whether industry portfolio returns predict the aggregate market. We find that a few industries significantly lead the market even controlling for well-recognized market predictors....