Cross-Section of Option Returns and Volatility

By Amit Goyal, Alessio Saretto. 2009

363 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/2584305dfcd7b652d7eeb701ed3ece03641f2fc4

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Lucio Sarno
2. Turan G. Bali
3. Lukas Menkhoff
4. Scott Murray
5. Bing Han
6. A. Schrimpf
7. Maik Schmeling
8. Grigory Vilkov

In Finance

1. Turan G. Bali
2. Lucio Sarno
3. Scott Murray
4. Bing Han
5. Baolian Wang
6. Justin Birru
7. Jie Cao
8. Lukas Menkhoff

Citations in the corpus

• Nominal price illusion (2016, methodology): “Our methodology and analysis largely follows that of Goyal and Saretto (2009) .”
• Cross-Section of Option Returns and Idiosyncratic Stock Volatility (2013, methodology): “The IVOL coefficient estimate is now 0.0822 (Model 2), compared with 0.0373 (Model 1) without controlling for the Goyal and Saretto variable.13 Thus, volatilityrelated mispricing shown by Goyal and Saretto (2009) exacerbates instead of explains our result.”
• Currency Momentum Strategies (2012, positive): “Next, given that the quoted spread is known to be too high relative to effective spreads, we follow Goyal and Saretto (2009) and report results for momentum excess returns after transaction costs of 75% (Panel A) and 50% (Panel B) of quoted spreads in Table 9.”
• Stock Options as Lotteries (2014, neutral): “Goyal and Saretto (2009) investigate the cross section of individual equity option returns as they relate to volatility risk premiums.”
• Does Risk-Neutral Skewness Predict the Cross-Section of Equity Option Portfolio Returns? (2013, methodology): “The returns of the skewness assets are calculated following Goyal and Saretto (2009), who calculate the asset return as the profits from the asset divided by the absolute value of the asset price.”
• Illiquidity Premia in the Equity Options Market (2018, background): “In the standard Black and Scholes (1973) model, the option price, O, for a non-dividend paying stock with price S is a function of the strike price, K, the risk-free rate, r, maturity, T, and constant volatility, σ, which we can write O = BS (S,K, r, T, σ) (2.1) Coval and Shumway (2001) show that…”
• Volatility Risk Premia and Exchange Rate Predictability (2016, neutral): “Several authors (see, for example, Goyal and Saretto, 2009, Bali and Hovakimian, 2009, and Buss and Vilkov, 2012) show that volatility risk premia have predictive power for the cross-section of stock returns.”
• Measuring Equity Risk with Option-Implied Correlations (2012, methodology): “…we compute the excess return associated with a long-short portfolio strategy based on the variance risk premiums of individual stocks.25 Similar to Goyal and Saretto (2009), we find that stocks with a high variance risk premium significantly underperform stocks with a low variance risk premium by…”