S. C. Anagnostopoulou, A. Tsekrekos – “Accounting Quality, Information Risk and Implied Volatility around Earnings Announcements”

Abstract: We examine the impact of accounting quality, used as a proxy for information risk, on the behavior of equity implied volatility around quarterly earnings announcements. Using US data during 1996-2010, we observe that lower (higher) accounting quality significantly relates to higher (lower) levels of implied volatility (IV) around announcements. Worse accounting quality is further associated with a significant increase … Read More »


X. Wesley Wang, Q. Lei, “Volatility Spread and the Stock Market Response to Earnings Announcements,” (working paper series)

Abstract: Using a broad sample of earnings announcements, we find that option call and put implied volatilities become increasingly misaligned as the earnings announcement dates (EAD) get closer. The percentage deviation between call and put implied volatilities increases monotonically in the one-month period leading up to the EAD. In addition, the direction of these deviations is consistent with the announcement … Read More »


M. Cremers, A.Fodor, D. Weinbaum, “Where Do Informed Traders Trade (First)? Option Trading Activity, News Releases, and Stock Return Predictability,” (working paper series)

Abstract: We examine patterns of option trading activity around news announcements. Using a database of option volume initiated by traders to open new positions, combined with a database of news releases, we find that option trading activity is unusually high both immediately before news days and on news days. The trading advantage of option traders stems from their ability to … Read More »


C. Culp, Y. Nozawa, P. Veronesi, “Option-Based Credit Spreads,” (working paper series)

Abstract: Theoretically, corporate debt is economically equivalent to safe debt minus a put option on the firm’s assets. We empirically show that indeed portfolios of long Treasuries and short traded put options (“pseudo bonds”) closely match the properties of traded corporate bonds. Pseudo bonds display a credit spread puzzle that is stronger at short horizons, unexplained by standard risk factors, … Read More »


F. Hollstein, M. Prokopczuk, “Estimating Beta,” (accepted paper series,Journal of Financial and Quantitative Analysis, Forthcoming)

Abstract: We conduct a comprehensive comparison of market beta estimation techniques. We study the performance of several historical, time-series model, and option implied estimators for estimating realized market beta. Thereby, we find the hybrid methodology of Buss and Vilkov (2012) to consistently outperform all other approaches. In addition, all other approaches, including fully implied and GARCH-based methods for dynamic conditional … Read More »


P. Andreou, A. Kagkadis, P. Maio, D Philip, “Dispersion in Options Traders’ Expectations and Stock Return Predictability,” (working paper series)

Abstract: We propose a measure of dispersion in options traders’ expectations about future stock returns by using dispersion in trading volume across strike prices. We find that an increased dispersion in expectations forecasts lower subsequent excess market returns at both short and long horizons. Trading strategies based on the dispersion measure reveal significant utility gains for a mean-variance investor as … Read More »


F. Brinkmann, O. Korn, “Risk-Adjusted Option-Implied Moments” (working paper series)

Abstract: Option-implied moments, like implied volatility, contain useful information about an underlying asset’s return distribution, but are derived under the risk-neutral probability measure. This paper shows how to convert risk-neutral moments into the corresponding physical ones. The main theoretical result expresses moments under the physical probability measure in terms of observed option prices and the preferences of a representative investor. … Read More »


P. Andreou, A. Kagkadis, P. Maio, D Philip, “Dispersion in Options Traders’ ‘Expectations and Stock Return Predictability,” (working paper series)

Abstract: We propose a measure of dispersion in options traders’ expectations about future stock returns by using dispersion in trading volume across strike prices. We find that an increased dispersion in expectations forecasts lower subsequent excess market returns at both short and long horizons. Trading strategies based on the dispersion measure reveal significant utility gains for a mean-variance investor as … Read More »