Generalized Bounds on the Conditional Expected Excess Return on Individual Stocks

• 成果类型: Article
• 署名作者: Chabi-Yo, Fousseni; Dim, Chukwuma; Vilkov, Grigory
• 署名单位: University of Massachusetts System; University of Massachusetts Amherst; Frankfurt School Finance & Management
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4367
• 发表日期: 2023
• 页码: 922-939
• 关键词: recovery; market spanning; Expected returns; higher-order moments; option implied

摘要

We derive generalized bounds on conditional expected excess returns that can be computed from option prices. The generalized lower bound may serve as an expected excess return proxy for individual and basket-type assets, is conditionally tight, accounts for the entire risk-neutral distribution of returns, and outperforms existing variance-based models in out-of-sample predictions. Bounds calibrated to realized returns correspond to reasonable risk aversion and prudence. On average, expected stock returns given by the bounds decrease on even weeks of the Federal Open Market Committee cycle. Cross-sectional tests deliver a reasonable market risk premium.