Returns of claims on the upside and the viability of U-shaped pricing kernels

• 成果类型: Article
• 署名作者: Bakshi, Gurdip; Madan, Dilip; Panayotov, George
• 署名单位: Georgetown University; University System of Maryland; University of Maryland College Park
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2010.03.009
• 发表日期: 2010
• 页码: 130-154
• 关键词: U-shaped pricing kernels; Claims on the upside; Monotonically declining pricing kernels; Expected returns; Negative average option returns; Short-selling; Heterogeneity in beliefs

摘要

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing region of the kernel. Using returns of (i) S&P 500 index calls, (ii) calls on major international equity indexes, (iii) digital calls, (iv) upside variance contracts, and (v) a theoretical construct that we denote as kernel call, we find broad support for the implications of U-shaped pricing kernels. A possible theoretical reconciliation of our empirical findings is explored through a model that accommodates heterogeneity in beliefs about return outcomes and short-selling. (c) 2010 Elsevier B.V. All rights reserved.