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Investor sentiment and value and growth stock index options

Coakley, Jerry, Dotsis, George, Liu, Xianquan and Zhai, Jia (2013) Investor sentiment and value and growth stock index options. The European Journal of Finance, 19 (TBC). TBC-TBC. [Journal article]

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DOI: 10.1080/1351847X.2013.779290

Abstract

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:Journal article
Faculties and Schools:Ulster Business School > Department of Accounting, Finance and Economics
Ulster Business School
ID Code:27605
Deposited By: Dr Jia Zhai
Deposited On:30 Oct 2013 16:33
Last Modified:30 Oct 2013 16:33

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