Topic:

Seasonal Momentumin Option Returns

Abstract:

We develop a new method to calculate returns on model-free "equity VIX" option portfolios, whose returns are highly correlated with realized minus implied variance. Compared to CBOE's VIX, our formulas are more accurate for both simulated and actual prices. Using this approach, we document a new quarterly cross-sectional continuation pattern in both realized variance and implied variance of individual stocks. Since implied variance does not fully anticipate the pattern, options that performed well at quarterly lags continue to earn high returns in the future. A long-short portfolio that exploits this effect achieves an annualized pre-cost Sharpe ratio of 3.31.

Lecturer:Haitao Mo

Haitao Mo ,the associate professor at the University of Kansas. His research interests are Empirical Asset Pricing, Empirical Option Pricing, Mutual Funds, Investment CAPM, Applications of Machine Learning and Big Data in Finance, FinTech. Seven research results have been published in top international journals, including the Journal of Finance, Review of Financial Studies, Journal of Financial Economics, Management Science, Review of Finance, etc.

Time: May 23 ,2024 14:00

Venue: B438,ZhixinBuilding,Central Campus