Cross section of option returns and idiosyncratic stock volatility

Cao, Jie; Han, Bing

doi:10.1016/j.jfineco.2012.11.010

Cited by 222 publications

(158 citation statements)

References 41 publications

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“…Idiosyncratic volatility, idiosyncratic skewness, and their interaction terms are included to control for stock characteristics that may proxy for speculative features of the underlying stocks. Cao and Han (2013) find that delta-hedged returns are negatively related to idiosyncratic volatility.…”

Section: Option Returns and Retail Tradingmentioning

confidence: 84%

Retail clientele and option returns

Choy

2015

Journal of Banking & Finance

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Section: Option Returns and Retail Tradingmentioning

confidence: 84%

Retail clientele and option returns

Choy

2015

Journal of Banking & Finance

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“…They find that idiosyncratic volatility has a significant and positive relation to future stock market returns. Moreover, Cao and Han (2012) find that delta-hedged equity option return decreases monotonically with an increase in the idiosyncratic volatility of the underlying stock.…”

Section: Introductionmentioning

confidence: 88%

New Risk Measure and Idiosyncratic Risk in Taiwan Stock Market

Jan¹,

Chiu²,

Wang³

2013

International Journal of Financial Research

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Under the model developed by Merton (1987), the idiosyncratic risk would be important to explain the expected stock return. We follow the approach of Daniel and Titman (1998), and use the risk measure developed by Jan and Wang (2012) to examine whether idiosyncratic risk can play an important role in explaining the expected return in Taiwan stock market. We find that beta can't explain the expected return, and that idiosyncratic risk has a positive relation to expected returns for stocks with smaller beta portfolio. We also explore a weak evidence of the positive relationship between idiosyncratic risk and expected return for size-sorted portfolio.

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“…For example, in Lu and Zhu (2010) and Christoffersen, Jacobs, and Mimouni (2010), the nature and importance of volatility risk are discussed by analyzing the pricing of VIX futures. In the paper of Cao and Han (2013), delta-hedging strategies are used related to VIX as a standard risk management technique of option traders in the financial industry. Hardy (2001) developed a regime-switching log-normal model for modeling S & P 500 stock return behavior.…”

Section: Introductionmentioning

confidence: 99%

A new analysis ofVIXusing mixture of regressions: Examination and short‐term forecasting for the S & P 500 market

Miljkovic

Sengupta

2018

High Frequency

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A novel approach to the analysis of S & P 500 market fluctuations is proposed using a K‐component mixture of regressions model. The Barndorff‐Nielsen and Shephard stochastic model is employed where the estimates of jumps of log‐returns are governed by Lévy subordinators. Daily VIX and VIX2 close prices are analyzed as the indicators of log‐return volatility and the corresponding variance of the S & P 500 index using the mixture model. The behavior of the S & P 500 market from 1 August 2005 to 31 December 2009 is analyzed and forecasted. A set of rules are provided to predict monthly fluctuation in the S & P 500 market. The procedure used in this paper gives a novel approach for constructing an “indicator”of non‐Gaussian jump of an empirical data set in finance using mixture of regression (Gaussian) analysis.

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Cross section of option returns and idiosyncratic stock volatility

Cited by 222 publications

References 41 publications

Retail clientele and option returns

Retail clientele and option returns

New Risk Measure and Idiosyncratic Risk in Taiwan Stock Market

A new analysis ofVIXusing mixture of regressions: Examination and short‐term forecasting for the S & P 500 market

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