Valuation and Returns on Stock Return Volatility

• 成果类型: Article
• 署名作者: Lyle, Matthew R.
• 署名单位: Emory University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2020-0151
• 发表日期: 2025
• 页码: 299-328
• 关键词: cross-section; Fundamental analysis; RISK; options; RESOLUTION; DYNAMICS; premium; cost

摘要

This paper provides an accounting-based valuation model that predicts that cross-sectional variation in firm-level returns to investments in both stock and stock return volatility are related to cross-sectional variation in firm-level fundamentals. The model predicts that expected stock returns have a positive quadratic relation with stock return variance and a negative quadratic relation with gains to trading in stock return variance. Consistent with these predictions, firms with high model-implied expected stock returns have high future stock return variance, and the relation is roughly quadratic. In contrast, firms with high expected stock returns have low future returns to trading in stock return variance through option contracts because these firms have high option-implied variance relative to future realized variance, i.e., low variance risk premia (VRP). The study provides a framework for using fundamentals for trading in individual stocks and options.