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Do Call Prices and the Underlying Stock Always Move in the Same Direction
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The authors empirically analyzes some properties shared by all one-dimensional diffusion option models and concludes that using SP options are not redundant securities, nor ideal hedging instruments, and puts and the underlying asset prices may go down together.Abstract:
This article empirically analyzes some properties shared by all one-dimensional diffusion option models. Using SP options are not redundant securities, nor ideal hedging instruments---puts and the underlying asset prices may go down together.read more
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The Cross-Section of Volatility and Expected Returns
TL;DR: This paper examined the pricing of aggregate volatility risk in the cross-section of stock returns and found that stocks with high sensitivities to innovations in aggregate volatility have low average returns, and that stock with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low return.
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Behavioural Finance: A Review and Synthesis
TL;DR: In this paper, the authors provide a synthesis of the Behavioural finance literature over the past two decades, including empirical and theoretical analyses of patterns in the cross-section of average stock returns, studies on trading activity, and research in corporate finance.
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The Option to Stock Volume Ratio and Future Returns
Travis L. Johnson,Eric C. So +1 more
TL;DR: In this article, the authors examine the information content of option and equity volumes when trade direction is unobserved, and they show that equity short-sale costs result in a negative relation between relative option volume and future value.
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Is There Price Discovery in Equity Options
TL;DR: In this paper, the authors show that option price quotes do not contain any information about future stock prices beyond what is already reflected in current stock prices, and that the disagreement events are typically precipitated by stock price moves, and often exhibit signed option volume providing pressure to eliminate the mispricing.
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Limited Arbitrage between Equity and Credit Markets
Nikunj Kapadia,Xiaoling Pu +1 more
TL;DR: In this article, the authors investigate whether short-horizon pricing discrepancies across firms' equity and credit markets are common and that an economically significant proportion of these are anomalous, indicating a lack of integration between the two markets.