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Investor sentiment and value and growth stock index options

Coakley, J and Dotsis, G and Liu, X and Zhai, J (2014) 'Investor sentiment and value and growth stock index options.' European Journal of Finance, 20 (12). 1211 - 1229. ISSN 1351-847X

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Abstract

© 2013, © 2013 Taylor & Francis. The paper examines the relationship between both individual and institutional investor sentiment measures and the risk-neutral skewness (RNS) of seven stock index options comprising either growth or value stocks. It provides novel evidence that growth index option prices are affected by sentiment measures. The regression results indicate a significantly positive relationship between sentiment measures and the RNS estimated from four growth index options and a negative relationship with two value index options. The results are economically significant since an associated long–short trading strategy yields high abnormal returns with a Sharpe ratio of up to 1.1 and zero exposure to systematic risk. These high abnormal returns provide evidence of a value premium type anomaly in the index options markets.

Item Type: Article
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: Jo Wiltshire
Date Deposited: 29 Aug 2013 16:40
Last Modified: 02 Mar 2018 13:15
URI: http://repository.essex.ac.uk/id/eprint/6016

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