Research
Discover the latest research papers written by OptionMetrics,
our customers, and researchers worldwide leveraging
OptionMetrics data.
Y. Timmer and B. Knox: Stagflationary Stock Returns *
We study investors' perceptions of inflation through the lens of a high-frequency event study, documenting they have a stagflationary view of the world. In response to higher-than-expected inflation, investors expect firms' nominal cash flows to remain stagnant while discount rates ... Read More
J. Wei, S. K. Choy, and H. Zhang: December Effect in Option Returns
This paper uncovers a December effect in option returns: The delta-hedged returns of options on both stocks and the S&P 500 index are substantially lower in December than in other months. Options are overvalued at the beginning of December due ... Read More
L. Switzer and Q. Tu: Options Trading Effects vs. Fears Effects on Stock Market Returns and Volatility
This paper examines the effects of equity options trading and investor sentiment on common stock market returns and volatility. Both call and put option trading amplify stock price volatility. Volatility transmission is stronger for larger firms with more heavily traded ... Read More
J. A. Crego and P. A. Garcia-Ares: From Options to Fractions: The Effects of Fractional Trading on the Options Market
The introduction of fractional trading has allowed retail investors to access high-priced stocks without relying on buying call options. We find that retail trading in affordable call options declines significantly after fractional trading becomes available. This shift leads to higher ... Read More
A. Vasquez, D. Amaya, N. D. Pearson, and P. A. Garcia-Ares: 0DTE Index Options and Market Volatility: How Large is Their Impact?
The large volume of trading in 0DTE S&P 500 index options suggests that options market makers (OMMs) have large positions in these options. Because short-dated options have large gammas, OMMs’ hedge rebalancing trades might be large enough to impact the ... Read More
S. K. Lu: Option Implied Timing with Ambiguity and Risk
By timing exposure to option implied information based on ambiguity (Knightian uncertainty) and risk, one can earn superior risk-adjusted returns, larger utility gains for mean variance investors, and an alpha even above that of volatility managed portfolios in Moreira & ... Read More
Highlighted Research
Reducing Risk through Multifactors: Implied Variance Asymmetry and Implied Beta
By G. DeSimone & O. Shih
February 15, 2024
OptionMetrics' latest study challenges conventional risk assessment using metrics like implied variance asymmetry (IVA), calculated as the measure of downside variance relative to upside variance, and option-implied beta strategies.