The Behavior of Volatility Expectations and Their Effects on Expected Returns

Aamir M Sheikh

The Journal of Business, 1993, vol. 66, issue 1, 93-116

Abstract: This article examines the behavior of common stock return volatility forecasts implied by call option prices and studies the relationship between implied volatilities and stock returns. The author estimates a model that integrates the findings of previous theoretical and empirical research. The author finds that implied. volatilities are significantly positively related to forecasts of market return volatility and to recent realizations of stock and market volatilities. The author's model is able to capture much of the previously unexplained cross-sectional and serial correlation in implied volatilities. Moreover, stock returns are found to be significantly positively related to lagged implied volatilities. Copyright 1993 by University of Chicago Press.

Date: 1993
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://dx.doi.org/10.1086/296595 full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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:ucp:jnlbus:v:66:y:1993:i:1:p:93-116

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().