Whose sentiment explains implied volatility change and smile?

Doojin Ryu, Doowon Ryu and Heejin Yang

Finance Research Letters, 2023, vol. 55, issue PA

Abstract: This letter examines the relationship between investor sentiment and options-implied volatility (IV) dynamics using a high-quality intraday dataset. By classifying each trade by investor type and moneyness, we find that sentiment affects intraday IV changes and explains IV structures and anomalies. Domestic individuals’ sentiment is highly related to implied volatility changes and has a more significant effect on out-of-the-money options that noisy individual investors heavily trade.

Keywords: Implied volatility; Individual investor; Intraday data; Sentiment; Volatility smile (search for similar items in EconPapers)
JEL-codes: G13 G14 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612323002118
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002118

DOI: 10.1016/j.frl.2023.103838

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().