Skip to main content

Research Repository

Advanced Search

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

Andreou, P.C.; Kagkadis, A.; Philip, D.; Tuneshev, T.

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


Authors

A. Kagkadis

T. Tuneshev



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.

Citation

Andreou, P., Kagkadis, A., Philip, D., & Tuneshev, T. (2018). Differences in options investors' expectations and the cross-section of stock returns. Journal of Banking and Finance, 94, 315-336. https://doi.org/10.1016/j.jbankfin.2018.07.016

Journal Article Type Article
Acceptance Date Jul 26, 2018
Online Publication Date Aug 2, 2018
Publication Date Sep 30, 2018
Deposit Date Jul 26, 2018
Publicly Available Date Feb 2, 2020
Journal Journal of Banking and Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 94
Pages 315-336
DOI https://doi.org/10.1016/j.jbankfin.2018.07.016
Public URL https://durham-repository.worktribe.com/output/1353509

Files





You might also like



Downloadable Citations