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Article: Why do options prices predict stock returns? Evidence from analyst tipping

TitleWhy do options prices predict stock returns? Evidence from analyst tipping
Authors
Issue Date2015
PublisherElsevier 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?
AbstractWe 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 Identifierhttp://hdl.handle.net/10722/212043
ISSN
2015 Impact Factor: 1.485
2015 SCImago Journal Rankings: 1.264

 

DC FieldValueLanguage
dc.contributor.authorLin, TC-
dc.contributor.authorLu, X-
dc.date.accessioned2015-07-21T02:20:47Z-
dc.date.available2015-07-21T02:20:47Z-
dc.date.issued2015-
dc.identifier.citationJournal of Banking & Finance, 2015, v. 52, p. 17-28-
dc.identifier.issn0378-4266-
dc.identifier.urihttp://hdl.handle.net/10722/212043-
dc.description.abstractWe 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.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jbf-
dc.relation.ispartofJournal of Banking & Finance-
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.-
dc.titleWhy do options prices predict stock returns? Evidence from analyst tipping-
dc.typeArticle-
dc.identifier.emailLin, TC: chunlin@hku.hk-
dc.identifier.emailLu, X: xllu@connect.hku.hk-
dc.identifier.authorityLin, TC=rp01077-
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.jbankfin.2014.11.008-
dc.identifier.hkuros244436-
dc.identifier.volume52-
dc.identifier.spage17-
dc.identifier.epage28-
dc.publisher.placeNetherlands-

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