Research

OptionMetrics data is an essential component of many studies performed by both academics and practitioners. Below is a partial list of academic papers that used OptionMetrics data:

S. Choy, J. Wei, “Liquidity Risk and Expected Option Returns”

Abstract: Using data from OptionMetrics for the period of 1996 to 2013, we establish the existence of liquidity risk premium in option returns via both sorting analyses and Fama-MacBeth regressions. In leverage-adjusted, hedged returns, the alpha due to liquidity risk ranges from 11.2 basis points to 19.7 basis points per month. In hedged returns unadjusted for leverage, the alpha ranges … Read More »


A. Manela, A. Moreira, “News Implied Volatility and Disaster Concerns”

Abstract: We construct a text-based measure of uncertainty starting in 1890 using front-page articles of the Wall Street Journal. News implied volatility (NVIX) peaks during stock market crashes, times of policy-related uncertainty, world wars and financial crises. In US post-war data, periods when NVIX is high are followed by periods of above average stock returns, even after controlling for contemporaneous … Read More »


W. Farkas, C. Necula, B. Waelchli, “Herding and Stochastic Volatility”

Abstract: In this paper we develop a one-factor non-affine stochastic volatility option pricing model where the dynamics of the underlying is endogenously determined from micro-foundations. The interaction and herding of the agents trading the underlying asset induce an amplification of the volatility of the asset over the volatility of the fundamentals. Although the model is non-affine, a closed form option … Read More »


J. Martin, G.Wang, “Are Active Managers a Drag on Investor Wealth? Evidence from an Option-Based Estimation”

Abstract: We estimate an option-based value of a fund manager’s conditional market timing skill in bear market states. We combine this value with alpha based estimates of selection skill to give an overall valuation of active management. At the aggregate level, we estimate that the benefit arising from the option value of active fund management in bad times can be … Read More »


F. Hett, A. Schmidt, “Bank Rescues and Bailout Expectations: The Erosion of Market Discipline During the Financial Crisis”

Abstract: We show that market discipline, defined as the extent to which firm-specific risk is reflected in market prices, eroded during the financial crisis in 2008. We design a novel test of changes in market discipline based on the relation between firm-specific risk measures and debt-to-equity hedge ratios. We find that market discipline already weakened after the rescue of Bear … Read More »


M. Kacperczyk, E. Pagnotta, “Chasing Private Information”

Abstract: We propose a measure for the convexity of an option-implied volatility curve, IV convexity, as a forward-looking measure of excess tail-risk contribution to the perceived variance of underlying equity returns. Using equity options data for individual U.S.-listed stocks during 2000-2013, we find that the average return differential between the lowest and highest IV convexity quintile portfolios exceeds 1% per … Read More »


H. Park, B. Kim, H. Shim, “A Smiling Bear in the Equity Options Market and the Cross-Section of Stock Returns,” (working paper series)

Abstract: We propose a measure for the convexity of an option-implied volatility curve, IV convexity, as a forward-looking measure of excess tail-risk contribution to the perceived variance of underlying equity returns. Using equity options data for individual U.S.-listed stocks during 2000-2013, we find that the average return differential between the lowest and highest IV convexity quintile portfolios exceeds 1% per … Read More »


P. Schneider, C. Wagner, J. Zechner, “Low Risk Anomalies?,” (working paper series)

Abstract: This paper shows theoretically and empirically that beta- and volatility-based low risk anomalies are driven by return skewness. The empirical patterns concisely match the predictions of our model that endogenizes the role of skewness for stock returns through default risk. With increasing downside risk, the standard capital asset pricing model (CAPM) increasingly overestimates expected equity returns relative to firms’ … Read More »


A. Eisdorfer, E. Kohl, “Corporate Sport Sponsorship and Stock Returns: Evidence from the NFL,” (working paper series)

Abstract: Most of the home stadiums/arenas of major-sport teams in the U.S. are sponsored by large publicly traded companies. Using NFL data we find that stock returns to the sponsoring firms are affected by the outcomes of games played in their stadiums. For example, the mean difference between next-day abnormal returns after a win and after a loss of the … Read More »


R. Israelov, L. Nielsen, “Still Not Cheap: Portfolio Protection in Calm Markets,” (working paper series)

Abstract: Recent equity volatility is near all-time lows. Option prices are also low. Many analysts suggest this represents a good opportunity to purchase put options for portfolio insurance. It is well-known that portfolio insurance is expensive on average, but what about in calm markets? History suggests it still is. We investigate the relationship between option richness and volatility across ten … Read More »