Option Mispricing around Nontrading Periods

• 成果类型: Article
• 署名作者: Jones, Christopher S.; Shemesh, Joshua
• 署名单位: University of Southern California
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12603
• 发表日期: 2018
• 页码: 861-900
• 关键词: stock-prices; earnings announcements; idiosyncratic risk; EQUITY OPTIONS; returns; volatility; MARKET; MODEL; INFORMATION; performance

摘要

We find that option returns are significantly lower over nontrading periods, the vast majority of which are weekends. Our evidence suggests that nontrading returns cannot be explained by risk, but rather are the result of widespread and highly persistent option mispricing driven by the incorrect treatment of stock return variance during periods of market closure. The size of the effect implies that the broad spectrum of finance research involving option prices should account for nontrading effects. Our study further suggests how alternative industry practices could improve the efficiency of option markets in a meaningful way.