Price delay and post-earnings announcement drift anomalies: The role of option-implied betas
Hwai-Chung Ho and
The North American Journal of Economics and Finance, 2020, vol. 54, issue C
In this study, we used informational advantage in the options market to investigate whether the option-implied equity risk developed by Chen, Chung, and Tsai (2016) - viewed as a type of time-varying beta - can help explain both the Hou and Moskowitz (2005) price delay premium and post-earnings announcement drift (PEAD). Our empirical results revealed a clear association between quintile portfolios with greater price delay premiums and higher option-implied betas, while the Fama-MacBeth regressions showed that the implied betas are positively related to future delay-based portfolio returns. Regarding the PEAD, we discerned a general increase in the mean of portfolio option-implied betas with standardized unexpected earnings portfolio drift. Our regression results support the notion that a portfolio’s PEAD can be viewed as compensation for the variations in option-implied betas.
Keywords: Equity risk; Option-implied betas; Price delay; Earnings momentum (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940818300330
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