Are disposition effect and skew preference correlated? Evidence from account‐level ELW transactions

Choi, Youngsoo; Kim, Woojin; Kwon, Eunji

doi:10.1002/fut.22055

Cited by 3 publications

(2 citation statements)

References 18 publications

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“…An et al (2020) find that the lottery-like-payoffs related anomalies are state dependent. Choi et al (2019) show that disposition effect and skewness preference are correlated. We find that the option return predictability of CallMoney is stronger when the underlying stock's price is further from its 52-weeks high, or when shareholders experience larger capital losses.…”

Section: Introductionmentioning

confidence: 90%

Measuring gambling activity in options market

Chen

Gan

2021

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PurposeThis paper investigates how the gambling measure captures market bubble events, and how it predicts stock return and option return.Design/methodology/approachThis paper proposes a gambling activity measure by jointly considering open interest and moneyness of out-of-the-money (OTM) individual equity call options.FindingsThe new measure, CallMoney, captures excessive optimism during the dot-com bubble, the oil price bubble and the pre-GFC stock market bubble. CallMoney robustly and negatively predicts both OTM and at-the-money call option returns cross-sectionally. The option return predictability of CallMoney is stronger when stock price is further from its 52-weeks high, capital gains overhang is lower, and when information uncertainty of the underlying stock is higher. CallMoney also robustly and negatively predicts cross-sectional stock returns.Originality/valueThe gambling measure has the advantages of being economically intuitive, model-free, easy to measure. The measure performs more robustly than existing lottery measures with respect to option and stock return predictability and more reliably captures the overpricing of options and stocks. The work helps understanding the gambling related anomalies in equity option returns and stock returns.

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Section: Introductionmentioning

confidence: 90%

Measuring gambling activity in options market

Chen

Gan

2021

RBF

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“…(1991), and Loomes and Taylor (1992). Preferences can also be skewed, resulting in biased behavior (Choi et al ., 2020), and investment choices can be influenced by sentiments (Kim et al ., 2015).…”

Section: Introductionmentioning

confidence: 99%

Financial Consumers’ Sense of Purpose and Consistent Financial Decisions: Experimental Evidence from South Korea*

Park

2020

Asia-Pac J of Fin Stud

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This paper examines the association between financial consumers’ sense of purpose and the consistency of their choices when they make investment decisions. The data are based on two controlled experiments conducted in South Korea. The first main result shows that financial consumers’ psychological well‐being has a positive association with choice consistency. The second result confirms the causal relationship between sense of purpose and choice consistency.

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