Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 21, 2008 erstellt
Description:
Is the pricing of index and individual stock options consistent with a factor model of stock returns? To answer this question, we use returns and option prices for a cross-section of stocks and a market index to carry out an integrated estimation of a multivariate stochastic volatility models with systematic factors and idiosyncratic return components. In particular, we estimate both the objective and risk neutral (RN) dynamics of the model using particle filter techniques. For a one-factor quot;market modelquot; of stock returns we find that 1) the market (Samp;P 500) betas of individual stocks are similar under the objective and RN measures, 2) there is a statistically and economically important common factor in the volatility of idiosyncratic returns, 3) the factor loadings of individual stocks on this common component of idiosyncratic volatility are also similar under the objective and RN measures, and 4) both market and common idiosyncratic volatility appear to be priced in option prices