Please use this identifier to cite or link to this item:
http://hdl.handle.net/10397/94398
Title: | Option-implied equity risk and the cross section of stock returns | Authors: | Chen, TF Chung, SL Tsai, WC |
Issue Date: | 2016 | Source: | Financial analysts journal, 2016, v. 72, no. 6, p. 42-55 | Abstract: | In our study, we take advantage of the forward-looking nature of information in option prices to estimate systematic equity risk while controlling for the effect of idiosyncratic skewness. Empirical results show a significantly positive relationship between the option-implied beta estimate and subsequent stock returns. A long-short portfolio based on our beta estimate earned an average monthly return of 0.96%. We also find that the option-implied beta predicts future realized betas and that the risk premium on the option-implied beta is positively associated with future market returns and contains information about future macroeconomic variables. | Publisher: | CFA Institute | Journal: | Financial analysts journal | ISSN: | 0015-198X | EISSN: | 1938-3312 | DOI: | 10.2469/faj.v72.n6.2 | Rights: | © 2016 CFA Institute. All rights reserved. This is an Accepted Manuscript of an article published by Taylor & Francis in Financial Analysts Journal on 27 Dec 2018 (published online), available at: http://www.tandfonline.com/10.2469/faj.v72.n6.2. |
Appears in Collections: | Journal/Magazine Article |
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Chen_Option-Implied_Equity_Risk.pdf | Pre-Published version | 371.28 kB | Adobe PDF | View/Open |
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