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Medientyp:
E-Artikel
Titel:
Volatility and Expected Option Returns
Beteiligte:
Hu, Guanglian;
Jacobs, Kris
Erschienen:
Cambridge University Press (CUP), 2020
Erschienen in:Journal of Financial and Quantitative Analysis
Sprache:
Englisch
DOI:
10.1017/s0022109019000310
ISSN:
0022-1090;
1756-6916
Entstehung:
Anmerkungen:
Beschreibung:
<jats:p>We analyze the relation between expected option returns and the volatility of the underlying securities. The expected return from holding a call (put) option is a decreasing (increasing) function of the volatility of the underlying. These predictions are supported by the data. In the cross section of equity option returns, returns on call (put) option portfolios decrease (increase) with underlying stock volatility. This finding is not due to cross-sectional variation in expected stock returns. It holds in various option samples with different maturities and moneyness, and is robust to alternative measures of underlying volatility and different weighting methods.</jats:p>