Option-implied betas and the cross section of stock returns
Harris, RDF; Li, X; Qiao, F
Date: 14 June 2018
Journal
Journal of Futures Markets
Publisher
Wiley
Publisher DOI
Abstract
We investigate the cross-sectional relationship between stock returns and a number of measures of option-implied beta. Using portfolio analysis, we show that the method proposed by Buss and Vilkov (2012) leads to a stronger relationship between implied beta and stock returns than other approaches. However, using the Fama and MacBeth ...
We investigate the cross-sectional relationship between stock returns and a number of measures of option-implied beta. Using portfolio analysis, we show that the method proposed by Buss and Vilkov (2012) leads to a stronger relationship between implied beta and stock returns than other approaches. However, using the Fama and MacBeth (1973) cross-section regression methodology, we show that the relationship is not robust to the inclusion of other firm characteristics. We further show that a similar result holds for implied downside beta. We therefore conclude that there is no robust relation between option-implied beta and returns.
Finance and Accounting
Faculty of Environment, Science and Economy
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