Investor Attention and Option Returns

• 成果类型: Article
• 署名作者: Choy, Siu Kai; Wei, Jason
• 署名单位: University of London; King's College London; University of Toronto; University Toronto Scarborough; University of Toronto
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4557
• 发表日期: 2023
• 页码: 4845-4863
• 关键词: INVESTOR ATTENTION; daily winners and losers; OPTION RETURNS; margins; Limits to arbitrage

摘要

This paper examines the attention effect in the options market. We show that option investors (especially retail investors) buy more calls and puts on both daily winner and loser stocks, and this buying pressure leads to an overvaluation, as shown in subsequent lower hedged returns. The overvaluation is due to a combination of differences of opinion, risk aversion, and margin requirements. The economic magnitude is large. For instance, a zero-financing portfolio involving options on loser stocks renders an alpha of 2.90% per month. Aside from contributing to the broad literature of investor attention versus asset returns, our study also sheds light on an important yet largely neglected topic: the impact ofmargins on option trading and pricing.