Information Content of Aggregate Implied Volatility Spread

• 成果类型: Article
• 署名作者: Han, Bing; Li, Gang
• 署名单位: Southwestern University of Finance & Economics - China; Chinese University of Hong Kong
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.3520
• 发表日期: 2021
• 关键词: informed trading in options; COMMONALITY; Implied volatility spread; STOCK RETURN PREDICTABILITY; Macroeconomic forecasts

摘要

Aggregate implied volatility spread (IVS), defined as the cross-sectional average difference in the implied volatilities of at-the-money call and put equity options, is significantly and positively related to future stock market returns at daily, weekly, and monthly to semiannual horizons. This return predictive power is incremental to existing return predictors, and it is significant both in sample and out of sample. Furthermore, IVS can forecast macroeconomic news up to one year ahead. The return predictability concentrates around macro news announcement. Common informed trading in equity options offers an integrated explanation for the ability of IVS to predict both future stock market returns and real economic activity.