Essays on information in options markets
Abstract/Contents
- Abstract
- In the first chapter, my coauthor and I examine the information content of option and equity volumes when trade direction is unobserved. In a multimarket asymmetric information model, equity short-sale costs result in a negative relation between relative option volume and future firm value. In our empirical tests, firms in the lowest decile of the option to stock volume ratio (O/S) outperform the highest decile by 0.34% per week (19.3% annualized). Our model and empirics both indicate that O/S is a stronger signal when short-sale costs are high or option leverage is low. O/S also predicts future firm-specific earnings news, consistent with O/S reflecting private information. In the second chapter, I show that in many asset pricing models, the equity market's expected return is a time-invariant linear function of its conditional variance, which can be estimated from options markets. However, I show that when the relation between conditional means and variances is state-dependent, an observer requires the combined information in multiple variance horizons to distinguish among the states and thereby reveal the equity risk premium. Empirically, I show that while the VIX by itself has little predictive power for future S& P 500 returns, the VIX term structure predicts next-quarter S& P 500 returns with a 5.2% adjusted R-squared.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2012 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Johnson, Travis Lake, Mr |
|---|---|
| Associated with | Stanford University, Graduate School of Business. |
| Primary advisor | Admati, Anat R |
| Thesis advisor | Admati, Anat R |
| Thesis advisor | Martin, Ian |
| Thesis advisor | Nagel, Stefan, 1973- |
| Thesis advisor | Pfleiderer, Paul |
| Advisor | Martin, Ian |
| Advisor | Nagel, Stefan, 1973- |
| Advisor | Pfleiderer, Paul |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Travis L. Johnson. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2012. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2012 by Travis Lake Johnson
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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