Option Return Predictability

• 成果类型: Article
• 署名作者: (Eunice) Zhan, Xintong; Han, Bing; Cao, Jie; Tong, Qing
• 署名单位: Fudan University; University of Toronto; Chinese University of Hong Kong
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab067
• 发表日期: 2022
• 页码: 1394
• 关键词: bid-ask spreads; cross-section; implied volatility; stock returns; RISK; anomalies; INFORMATION; illiquidity; COMPETITION; INVESTMENT

摘要

We uncover new return predictability in the cross-section of delta-hedged equity options. Expected returns to writing delta-hedged calls are negatively correlated with stock price, profit margin, and firm profitability, but positively correlated with cash holding, cash flow variance, new shares issuance, total external financing, distress risk, and dispersion of analysts' forecasts. Our option portfolio strategies have annual Sharpe ratio above two and remain profitable after transaction costs. Their profits can be explained by two option factors, while equity risk factors have no explanatory power. We find support for several economic channels at work, yet the option return predictability remains puzzling.