Learning and Index Option Returns

Alejandro Bernales, Gonzalo Cortazar, Luka Salamunic and George Skiadopoulos

Journal of Business & Economic Statistics, 2020, vol. 38, issue 2, 327-339

Abstract: Little is known about the economic sources that may generate the abnormal returns observed in put index options. We show that the learning process followed by investors may be one such source. We develop an equilibrium model under partial information in which a rational Bayesian learner prices put option contracts. Our model generates put option returns similar to the empirical returns of S&P 500 put index options. This result is not obtained when we analyze alternative setups of the model in which no learning process exists.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/07350015.2018.1505629 (text/html)
Access to full text is restricted to subscribers.

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:taf:jnlbes:v:38:y:2020:i:2:p:327-339

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/UBES20

DOI: 10.1080/07350015.2018.1505629

Access Statistics for this article

Journal of Business & Economic Statistics is currently edited by Eric Sampson, Rong Chen and Shakeeb Khan

More articles in Journal of Business & Economic Statistics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().