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- Publisher Website: 10.1016/j.jbankfin.2014.11.008
- Scopus: eid_2-s2.0-84919935980
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Article: Why do options prices predict stock returns? Evidence from analyst tipping
Title | Why do options prices predict stock returns? Evidence from analyst tipping |
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Authors | |
Keywords | Analyst tipping Implied volatility skew Implied volatility spread Informed traders Market liquidity |
Issue Date | 2015 |
Publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jbf |
Citation | Journal of Banking & Finance, 2015, v. 52, p. 17-28 How to Cite? |
Abstract | We study the role of analysts and options traders in the information transmission between options and stock markets. We first show that the predictive power of option implied volatilities (IVs) on stock returns more than doubles around analyst-related events, indicating that a significant proportion of the options predictability on stock returns comes from informed options traders’ information about upcoming analyst-related news. We examine three explanations for this finding: tipping, reverse tipping and common information. We find that analyst tipping to options traders is the most consistent explanation of these predictive patterns. |
Persistent Identifier | http://hdl.handle.net/10722/212043 |
ISSN | 2021 Impact Factor: 3.539 2020 SCImago Journal Rankings: 1.580 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Lin, TC | - |
dc.contributor.author | Lu, X | - |
dc.date.accessioned | 2015-07-21T02:20:47Z | - |
dc.date.available | 2015-07-21T02:20:47Z | - |
dc.date.issued | 2015 | - |
dc.identifier.citation | Journal of Banking & Finance, 2015, v. 52, p. 17-28 | - |
dc.identifier.issn | 0378-4266 | - |
dc.identifier.uri | http://hdl.handle.net/10722/212043 | - |
dc.description.abstract | We study the role of analysts and options traders in the information transmission between options and stock markets. We first show that the predictive power of option implied volatilities (IVs) on stock returns more than doubles around analyst-related events, indicating that a significant proportion of the options predictability on stock returns comes from informed options traders’ information about upcoming analyst-related news. We examine three explanations for this finding: tipping, reverse tipping and common information. We find that analyst tipping to options traders is the most consistent explanation of these predictive patterns. | - |
dc.language | eng | - |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jbf | - |
dc.relation.ispartof | Journal of Banking & Finance | - |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.subject | Analyst tipping | - |
dc.subject | Implied volatility skew | - |
dc.subject | Implied volatility spread | - |
dc.subject | Informed traders | - |
dc.subject | Market liquidity | - |
dc.title | Why do options prices predict stock returns? Evidence from analyst tipping | - |
dc.type | Article | - |
dc.identifier.email | Lin, TC: chunlin@hku.hk | - |
dc.identifier.email | Lu, X: xllu@connect.hku.hk | - |
dc.identifier.authority | Lin, TC=rp01077 | - |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1016/j.jbankfin.2014.11.008 | - |
dc.identifier.scopus | eid_2-s2.0-84919935980 | - |
dc.identifier.hkuros | 244436 | - |
dc.identifier.volume | 52 | - |
dc.identifier.spage | 17 | - |
dc.identifier.epage | 28 | - |
dc.identifier.isi | WOS:000351961700002 | - |
dc.publisher.place | Netherlands | - |
dc.identifier.issnl | 0378-4266 | - |