Option measures and stock characteristics

Hainan Sheng

Finance Research Letters, 2022, vol. 44, issue C

Abstract: An extensive existing literature demonstrates that various option measures (e.g., option-to-stock trading volume ratio) exhibit return predictability in the cross section of stocks. Exploring the fundamental nature and robustness of these findings, we investigate whether this previously identified return predictability of option measures is highly associated with the characteristics or attributes of the underlying stock. We find that the return predictability of option measures is heavily impacted by a subset of stocks whose characteristics also predict future returns, thus providing evidence that stock characteristics are one of the main channels through which option measures capture informed trading.

Keywords: Option measures; Return predictability; Stock characteristics (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001392

DOI: 10.1016/j.frl.2021.102058

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