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    Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Banking & Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking & Finance, 94, 2018 DOI: 10.1016/j.jbankfin.2018.07.016

    Accepted author manuscript, 892 KB, PDF document

    Embargo ends: 2/02/20

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Differences in options investors’ expectations and the cross-section of stock returns

Research output: Contribution to journalJournal article

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Differences in options investors’ expectations and the cross-section of stock returns. / Andreou, Panayiotis; Kagkadis, Anastasios; Philip, Dennis ; Tuneshev, Ruslan .

In: Journal of Banking and Finance, Vol. 94, 09.2018, p. 315-336.

Research output: Contribution to journalJournal article

Harvard

Andreou, P, Kagkadis, A, Philip, D & Tuneshev, R 2018, 'Differences in options investors’ expectations and the cross-section of stock returns', Journal of Banking and Finance, vol. 94, pp. 315-336. https://doi.org/10.1016/j.jbankfin.2018.07.016

APA

Vancouver

Author

Andreou, Panayiotis ; Kagkadis, Anastasios ; Philip, Dennis ; Tuneshev, Ruslan . / Differences in options investors’ expectations and the cross-section of stock returns. In: Journal of Banking and Finance. 2018 ; Vol. 94. pp. 315-336.

Bibtex

@article{662ba215ce714fd6abc56610f0e98d72,
title = "Differences in options investors’ expectations and the cross-section of stock returns",
abstract = "We provide strong evidence that the dispersion of individual stock options trading volume across moneynesses (IDISP) contains valuable information about future stock returns. Stocks with high IDISP consistently underperform those with low IDISP by more than 1{\%} per month. In line with the idea that IDISP reflects dispersion in investors’ beliefs, we find that the negative IDISP-return relationship is particularly pronounced around earnings announcements, in high sentiment periods and among stocks that exhibit relatively high short-selling impediments. Moreover, the IDISP effect is highly persistent and robustly distinct from the effects of a large array of previously documented cross-sectional return predictors.",
keywords = "Dispersion of beliefs, Disagreement in options market, Cross-section of stock returns, Equity options, Option trading volume",
author = "Panayiotis Andreou and Anastasios Kagkadis and Dennis Philip and Ruslan Tuneshev",
note = "This is the author’s version of a work that was accepted for publication in Journal of Banking & Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking & Finance, 94, 2018 DOI: 10.1016/j.jbankfin.2018.07.016",
year = "2018",
month = "9",
doi = "10.1016/j.jbankfin.2018.07.016",
language = "English",
volume = "94",
pages = "315--336",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Differences in options investors’ expectations and the cross-section of stock returns

AU - Andreou, Panayiotis

AU - Kagkadis, Anastasios

AU - Philip, Dennis

AU - Tuneshev, Ruslan

N1 - This is the author’s version of a work that was accepted for publication in Journal of Banking & Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking & Finance, 94, 2018 DOI: 10.1016/j.jbankfin.2018.07.016

PY - 2018/9

Y1 - 2018/9

N2 - We provide strong evidence that the dispersion of individual stock options trading volume across moneynesses (IDISP) contains valuable information about future stock returns. Stocks with high IDISP consistently underperform those with low IDISP by more than 1% per month. In line with the idea that IDISP reflects dispersion in investors’ beliefs, we find that the negative IDISP-return relationship is particularly pronounced around earnings announcements, in high sentiment periods and among stocks that exhibit relatively high short-selling impediments. Moreover, the IDISP effect is highly persistent and robustly distinct from the effects of a large array of previously documented cross-sectional return predictors.

AB - We provide strong evidence that the dispersion of individual stock options trading volume across moneynesses (IDISP) contains valuable information about future stock returns. Stocks with high IDISP consistently underperform those with low IDISP by more than 1% per month. In line with the idea that IDISP reflects dispersion in investors’ beliefs, we find that the negative IDISP-return relationship is particularly pronounced around earnings announcements, in high sentiment periods and among stocks that exhibit relatively high short-selling impediments. Moreover, the IDISP effect is highly persistent and robustly distinct from the effects of a large array of previously documented cross-sectional return predictors.

KW - Dispersion of beliefs

KW - Disagreement in options market

KW - Cross-section of stock returns

KW - Equity options

KW - Option trading volume

U2 - 10.1016/j.jbankfin.2018.07.016

DO - 10.1016/j.jbankfin.2018.07.016

M3 - Journal article

VL - 94

SP - 315

EP - 336

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

ER -