Forward-looking information on growth and uncertainty implied by derivative securities: Evidence from an emerging market
International Review of Economics & Finance, 2019, vol. 62, issue C, 240-266
In this paper, we investigate investors' expectations on economic growth and uncertainty risk implied by derivative securities. Empirical evidence on investors’ expectations implied by derivative securities has been intensively studied in the U.S. and other developed markets, however, such evidence still seems to be rare for emerging markets. Using high frequency data of the Taiwan Stock Exchange (TAIEX) weighted index and its derivatives from Jan-02-2003 to Dec-31-2014, we construct time series of implied dividends, variance risk premium and higher risk-neutral moments. We find that term structure of the implied dividend yield and variance risk premium have some abilities on predicting the excess return of the TAIEX weighted index and growth of industrial production index of Taiwan. We also demonstrate that there is a strong and positive relation between the risk-neutral skewness and options slope, which is in line with what previous literature found in the U.S. stock market.
Keywords: Implied dividend; Risk neutral kurtosis; Risk neutral skewness; Variance risk premium (search for similar items in EconPapers)
JEL-codes: G12 G14 G17 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:62:y:2019:i:c:p:240-266
Access Statistics for this article
International Review of Economics & Finance is currently edited by H. Beladi and C. Chen
More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().