Excess returns to buying low options‐volume stocks and selling high options‐volume stocks: Information or characteristics?

Li Cai and Jian Du

Journal of Futures Markets, 2018, vol. 38, issue 12, 1487-1513

Abstract: This paper documents a negative relationship between options‐trading volume and stock returns. The relationship is remarkably robust and cannot be explained by existing asset‐pricing theorems. We find that strategies that require buying stocks with low options‐trading volume in the past and selling stocks with high options‐trading volume in the past generate significant positive abnormal returns. Further analysis indicates that the pattern mostly represents a characteristic effect, in which options trading predicts stock returns through its relationship with determinant characteristics such as beta, illiquidity, and idiosyncratic volatility.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1002/fut.21957

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:38:y:2018:i:12:p:1487-1513

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 ().