Option-Implied Volatility Measures and Stock Return Predictability
Author | : Fu, Xi |
Publisher | : |
Total Pages | : |
Release | : 2019 |
ISBN-10 | : OCLC:1304316155 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Option-Implied Volatility Measures and Stock Return Predictability written by Fu, Xi and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using firm-level option and stock data, we examine the predictive ability of option-implied volatility measures proposed by previous studies and recommend the best measure using up-to-date data. Portfolio level analysis implies significant non-zero risk-adjusted returns on arbitrage portfolios formed on the call-put implied volatility spread, implied volatility skew, and realized-implied volatility spread. Firm-level cross-sectional regressions show that, the implied volatility skew has the most significant predictive power over various investment horizons. The predictive power persists before and after the 2008 Global Financial Crisis.