We found a match
Your institution may have rights to this item. Sign in to continue.
- Title
Correlated implied volatility with jump and cross section of stock returns.
- Authors
Ze‐To, Samuel; Cahan, Steven
- Abstract
I derive the option-implied volatility allowing for nonzero correlation between price jump and diffusive risk to examine the information content of implied diffusive, jump risks and their implied covariance in the cross-sectional variation of future returns. This study documents a strong predictive power of realized volatility and correlated implied volatility spread ( RV − IV C) in the cross section of stock returns. The difference of realized volatility with the implied diffusive volatility ( RV − σ C), jump risk ( RV − γ C) and covariance ( RV − ICov) can forecast future returns. These RV − σ C and RV − γ C anomalies are robustly persistent even after controlling for market, size, book-to-market value, momentum and liquidity factors.
- Subjects
VOLATILITY (Securities); STOCK prices; RATE of return on stocks; BOOK-to-market ratio; LIQUIDITY (Economics)
- Publication
Accounting & Finance, 2016, Vol 56, Issue 4, p1187
- ISSN
0810-5391
- Publication type
Article
- DOI
10.1111/acfi.12111