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Option-implied information and stock herding

Voukelatos, Nikolaos and Verousis, Thanos (2019) 'Option-implied information and stock herding.' International Journal of Finance and Economics. ISSN 1076-9307

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Abstract

In this paper, weexamineif herding behavior in the equity market can be explained by option-implied information.Our empirical results confirm the commonly reportedabsence of herding as a general tendency in the US equity market. However, we find evidence of significant herding behaviorduring periods when option-implied information reflects a pessimistic view about the future prospects of the equitymarket.More specifically, we find that individual stock returns tend to cluster more closely around the market consensus during days of high implied index volatility, more pronounced negative implied skewness and higher trading volume in index puts.

Item Type: Article
Uncontrolled Keywords: herding;cross-sectional dispersion; options; market stress
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 04 Apr 2019 10:00
Last Modified: 17 Oct 2019 15:55
URI: http://repository.essex.ac.uk/id/eprint/24402

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