TY  - UNPD
A1  - Neuhierl, Andreas
A1  - Tang, Xiaoxiao
A1  - Varneskov, Rasmus Tangsgaard
A1  - Zhou, Guofu
T1  - Option characteristics as cross-sectional predictors
T2  - LawFin working paper ; No. 37
N2  - We provide the first comprehensive analysis of option information for pricing the cross-section of stock returns by jointly examining extensive sets of firm and option characteristics. Using portfolio sorts and high-dimensional methods, we show that certain option measures have significant predictive power, even after controlling for firm characteristics, earning a Fama-French three-factor alpha in excess of 20% per annum. Our analysis further reveals that the strongest option characteristics are associated with information about asset mispricing and future tail return realizations. Our findings are consistent with models of informed trading and limits to arbitrage.
T3  - LawFin Working Paper - 37 
KW  - Asset Pricing
KW  - Factor Models
KW  - High-dimensional Methods
KW  - Option-implied Risk
Y1  - 2022
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/65244
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-652441
UR  - https://ssrn.com/abstract=3795486
N1  - The paper has benefited significantly from a fellow visit of Andreas Neuhierl at the Center for Advanced Studies Foundations of Law and Finance funded by the German Research Foundation (Deutsche Forschungsgemeinschaft, DFG) - project FOR 2774. Financial support from the Center for Research in Econometric Analysis of Time Series (CRE- ATES) and the Danish Finance Institute (DFI) is gratefully acknowledged.
IS  - June 9, 2022
PB  - Center for Advanced Studies on the Foundations of Law and Finance, House of Finance, Goethe University
CY  - Frankfurt am Main
ER  -