Common Factors in Equity Option Returns

• 成果类型: Article
• 署名作者: Horenstein, Alex; Vasquez, Aurelio; Xiao, Xiao
• 署名单位: University of Miami; Instituto Tecnologico Autonomo de Mexico; University of Cambridge
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454; 1465-7368
• DOI: 10.1093/rfs/hhaf060
• 发表日期: 2026-03
• 页码: 835-874
• 关键词: C14; G13; G17; cross-section; time-series; RISK; arbitrage; number; price

摘要

We explore the factor structure in delta-hedged equity option returns. A sparse latent factor model generates a correlation of 0.90 or higher between average and predicted option returns. A comparable performance is achieved with a characteristic-based model containing four factors: the equally weighted option portfolio, a factor based on the difference between historical and implied volatilities, a factor based on the ratio of corporate cash holdings to the total value of the firm's assets, and a factor based on volatility of volatility. Traditional stock return factors cannot explain these option factors.