Annual Conference

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Investment Finance

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May 2016

We uncover new return predictability in the cross-section of delta-hedged equity options. Expected returns to writing delta-hedged calls are negatively correlated with stock price, profit margin and firm profitability, but positively correlated with cash holding, cash flow variance, new shares issua...
Keywords: Cross-section of equity options, delta-hedged options, return predictability, stock characteristics, option factor model
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Annual Conference

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Investment Finance

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May 2016

We propose a direct measure of abnormal institutional investor attention (AIA) using news searching and news reading activity for specific stocks on Bloomberg terminals. AIA is highly correlated with institutional trading measures and related to, but different from, other investor attention proxies....
Keywords: attention, institutional investors, retail investors, earnings announcements, Analyst recommendations, News, Bloomberg
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2016

We present a dynamic model that links characteristic-based return predictability to systematic factors that determine the evolution of firm fundamentals. In the model, an economy-wide disruption process reallocates profits from existing businesses to new projects and thus generates a source of syste...
Keywords: characteristic-based return predictability, systematic risk, mispricing
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2016

The distance between option-implied and traded stock prices (DOTS) predicts future stock returns. A trading strategy based on DOTS yields an alpha of 85 basis points on the day after portfolio formation. We show that DOTS is strongly related to return reversals, order imbalances, and transaction cos...
Keywords: Price Pressure, Put-Call Parity, return predictability, Informed Trading
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Annual Conference

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Investment Finance

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May 2016

We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more easily, mo...
Keywords: Asset Pricing, market efficiency, Asset Management, search, Information
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