Fundamental analysis and equity volatility
Abstract/Contents
- Abstract
- I examine whether financial statement information can predict future realized volatility incremental to the volatility implied by option market prices. Prior research establishes that option-implied volatility is a biased estimator of future realized volatility. I hypothesize that financial statement information, by providing information about economic events correlated with future volatility, is informative in the prediction of future volatility and not fully incorporated in either past volatility or the market's expectation of future volatility. I confirm this empirically and show that the finding is robust to the measurement of option-implied volatility using either the Black-Scholes formula or a model-free approach. I also document abnormal returns to an option-based trading strategy that takes a long (short) position in firms with financial statement information indicative of high (low) future volatility. Additionally, I provide evidence that contradicts a risk-based explanation for the incremental predictive ability of accounting information. Taken together, my results indicate that the market's failure to fully process accounting-based fundamental information explains some of the previously documented bias in implied volatility.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2013 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Sridharan, Suhas A |
|---|---|
| Associated with | Stanford University, Graduate School of Business. |
| Primary advisor | Barth, Mary E |
| Thesis advisor | Barth, Mary E |
| Thesis advisor | Kasznik, Ron |
| Thesis advisor | Lee, Charles |
| Advisor | Kasznik, Ron |
| Advisor | Lee, Charles |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Suhas A. Sridharan. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2013. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2013 by Suhas Aruna Sridharan
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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