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, 893 KB, PDF document
Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License
Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
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 -