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Title: Differences in options investors’ expectations and the cross-section of stock returns
Authors: Andreou, Panayiotis 
Kagkadis, Anastasios 
Philip, Dennis 
Tuneshev, Ruslan 
Keywords: Dispersion of beliefs;Disagreement in options market;Cross-section of stock returns;Equity options;Option trading volume
Category: Economics and Business
Field: Social Sciences
Issue Date: Sep-2018
Publisher: Elsevier B.V.
Source: Journal of Banking and Finance, 2018, vol. 94, pp. 315-336
Journal: Journal of Banking & Finance 
Abstract: We provide strong evidence that the dispersion of individual stock options trading volume across moneynesses (IDISP) contains valuable information about future stock returns. Stocks with high IDISP consistently underperform those with low IDISP by more than 1% per month. In line with the idea that IDISP reflects dispersion in investors’ beliefs, we find that the negative IDISP-return relationship is particularly pronounced around earnings announcements, in high sentiment periods and among stocks that exhibit relatively high short-selling impediments. Moreover, the IDISP effect is highly persistent and robustly distinct from the effects of a large array of previously documented cross-sectional return predictors.
ISSN: 0378-4266
DOI: 10.1016/j.jbankfin.2018.07.016
Collaboration : Cyprus University of Technology
Lancaster University
Durham University
University of St Andrews
Rights: © Elsevier B.V.
Type: Article
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