What Does the Individual Option Volatility Smirk Tell Us About Future Equity Returns?

By Yuhang Xing, Xiaoyan Zhang, R. Zhao. Journal of Financial and Quantitative Analysis, 2010

628 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/bd52b799f4acb281532d278c2e720cef34fdca00

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Citations in the corpus

Ex Ante Skewness and Expected Stock Returns (2013, background): “Consistent with the Ang, Hodrick, Xing, and Zhang (2006) and Ang, Hodrick, Xing, and Zhang (2009) findings for physical measures of idiosyncratic volatility, we find a negative relation between risk-neutral volatility and subsequent returns.”
Institutional Investor Stability and Crash Risk: Monitoring versus Short-Termism? (2013, background): “Xing et al. (2010) and Yan (2011) suggest that extreme outcomes in the equity market have a material impact on the welfare of investors and that investors are concerned about the occurrence of these extreme outcomes.”
Short interest and stock price crash risk (2015, result): “As noted by Xing et al. (2010) and Yan (2011), extreme outcomes in the equity market have a material impact on the welfare of investors and investors are concerned about the occurrence of these outcomes.3 In addition, our findings complement the recent strand of literature investigating the…”
Measuring Equity Risk with Option-Implied Correlations (2012, background): “…Hovakimian (2009) show that the variance risk premium is negatively linked to returns; and Cremers and Weinbaum (2010), Rehman and Vilkov (2010), Xing, Zhang, and Zhao (2010), and Conrad, Dittmar, and Ghysels (2012), among others, find a significant relation between implied skewness and future…”
The Joint Cross Section of Stocks and Options (2013, positive): “Bali and Hovakimian (2009), Cremers and Weinbaum (2010), and Xing, Zhang, and Zhao (2010) use information in the cross section of options including the difference between implied and realized volatilities, put-call parity deviations, and risk-neutral skewness.”
Does Realized Skewness Predict the Cross-Section of Equity Returns? (2015, result): “This exceeds the premiums reported in Boyer, Mitton, and Vorkink (2010) and in Zhang (2006), which are 67 and 36 basis points per month, respectively.”
Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies (2012, positive): “The Downside risk measure is defined as the mean implied volatility estimated using put options written on the BHC’s stock (Bali and Hovakimian (2009), Cremers and Weinbaum (2010) and Xing, Zhang, and Zhao (2010)).”
Financial Statement Comparability and Expected Crash Risk (2016, positive): “Consistent with prior research (Bollen andWhaley, 2004; Xing et al., 2010; Van Buskirk, 2011; Kim and Zhang, 2014), we measure the implied volatility smirk (IV_SKEWit) of stock i's option as the difference between the implied volatility of an OTM put on day t (IVOTMPit ) and that of an ATM call (IV…”