Does behavioural theory explain return-implied volatility relationship? Evidence from India
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In this article, the authors investigated whether behavioural theory is a superior explanation for short-term return-volatility relationship than traditional leverage and volatility feedback hypotheses, and they showed that behavioural theory explains the relationship better than the leverage and feedback hypotheses.Abstract:
The study investigates whether behavioural theory is a superior explanation for short-term return–volatility relationship than traditional leverage and volatility feedback hypotheses. Using VAR and quantile regression frameworks, the study shows that behavioural theory explains the relationship better than the leverage and feedback hypotheses. The study supports that behavioural biases (representative, affect, extrapolation heuristics, etc.) exist among market participants, and these biases cause India Volatility Index (India VIX) to be an efficient hedge for extreme negative market movements.read more
Citations
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Journal ArticleDOI
Does Implied Volatility (or Fear Index) affect Islamic Stock Returns and Conventional Stock Returns Differently? Wavelet-based Granger-Causality, Asymmetric Quantile Regression and NARDL approaches
TL;DR: In this article , the authors make an initial attempt to compare the asymmetric reaction of Islamic and conventional stock returns to implied volatility using Wavelet-based Granger causality, asymmetric quantile regression model (QRM), and NARDL for the sample period from 2008 to 2019.
Journal ArticleDOI
Asymmetric relationship between implied volatility, index returns and trading volume: an application of quantile regression model
Saif Siddiqui,Preeti Roy +1 more
TL;DR: In this paper, the authors explored the relationship between volatility, index returns and trading volume within the Indian stock market and found that the investor's heterogenous beliefs are found to be correlated with investor's risk aversion.
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Options Order Flow, Volatility Demand and Variance Risk Premium
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References
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Daniel Kahneman,Amos Tversky +1 more
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TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
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Prospect theory: analysis of decision under risk
Daniel Kahneman,Amos Tversky +1 more
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On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks
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