Aggregate Volatility and Market Jump Risk: An Option-Based Explanation to Size and Value Premia

Yakup Arisoy ()

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Abstract: It is well-documented that stock returns have different sensitivities to changes in aggregate volatility, however less is known about their sensitivity to market jump risk. By using S&P 500 crash-neutral at-the-money straddle and out-of-money put returns as proxies for aggregate volatility and market jump risk, I document significant differences between volatility and jump loadings of value vs. growth, and small vs. big portfolios. In particular, small (big) and value (growth) portfolios exhibit negative (positive) and significant volatility and jump betas. I also provide further evidence that both volatility and jump risk factors are priced and negative.

Keywords: Empirical Asset Pricing; Beta; Options; Stock Returns; Stocks (search for similar items in EconPapers)
Date: 2014-01
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Citations: View citations in EconPapers (3)

Published in Journal of Futures Markets, 2014, 34 (1), ⟨10.1002/fut.21589⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01634549

DOI: 10.1002/fut.21589

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