Option-Implied Skewness and the Value of Financial Intermediaries

Silvia Bressan and Alex Weissensteiner
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Alex Weissensteiner: Free University of Bozen-Bolzano

Journal of Financial Services Research, 2023, vol. 64, issue 2, No 2, 207-229

Abstract: Abstract In this paper, we analyze the relationship among skewness, value, and stock returns for US financial intermediaries. Further, we compare skewness based on past returns to risk-neutral skewness based on options. We find that the option-implied skewness has a significantly higher explanatory power. In line with the strand of literature on investors exploiting mispriced stocks through option trading, we find that a higher ex ante skewness indicates a low valuation that predicts higher returns. We investigate the relationship between skewness and value for each segment of intermediaries, and we show that the link is strongest for financial technology firms.

Keywords: Financial intermediaries; Corporate value; Stock returns; Option-implied skewness (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10693-022-00387-y

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