Informed Trading in the Options Market and Stock Return Predictability
JoongHo Han,
Da‐Hea Kim and
Suk‐Joon Byun
Journal of Futures Markets, 2017, vol. 37, issue 11, 1053-1093
Abstract:
Previous research highlights the importance of two distinct types of informed trading in the options market: trading on the price direction of underlying stocks, and trading on their uncertainty. Surprisingly, however, the studies considering these in a unified framework are scant.This study attempts to fill the gap. We predict that when both directional andvolatility information could motivateoptions trading, the return predictability of options volume hinges onthe shape of the volatility smirk.Consistent with this prediction, we find thatthe negative relationship between options volume and future stock returns is concentrated in stocks exhibiting steep volatility smirks. © 2017 Wiley Periodicals, Inc. Jrl Fut Mark 37:1053–1093, 2017
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (5)
Downloads: (external link)
http://hdl.handle.net/
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:wly:jfutmk:v:37:y:2017:i:11:p:1053-1093
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314
Access Statistics for this article
Journal of Futures Markets is currently edited by Robert I. Webb
More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().