https://scholars.lib.ntu.edu.tw/handle/123456789/612066
Title: | Options-implied information and the momentum cycle | Authors: | Liu, MY Chuang Wen I Lo, CL |
Keywords: | Momentum stage; Options-implied information; Implied volatility spread and skew; Early-and late-stage momentum strategies; MARKET QUALITY; PRICE MOMENTUM; CROSS-SECTION; STOCK RETURNS; SHORT SALES; CONSTRAINTS; TRADERS; IMPACT; RISK | Issue Date: | 2021 | Publisher: | ELSEVIER | Journal Volume: | 53 | Source: | JOURNAL OF FINANCIAL MARKETS | Abstract: | We employ options-implied information derived from implied volatility spreads and implied volatility skews to identify the momentum stage of stocks. We show that the early-stage (late-stage) momentum strategy of buying identified early-stage (late-stage) winners and selling identified early-stage (late-stage) losers outperforms (underperforms) the conventional momentum strategy of buying winners and selling losers across all momentum stages. We also find that the price momentum of the early-stage (late-stage) momentum strategy experiences slower (faster) reversal than that of the conventional momentum strategy. The outperformance of the early-stage momentum strategy comes primarily from the contribution of losers, as options-implied measures better place losers in their momentum stages than winners. Moreover, the identification ability of options-implied measures increases with the informativeness of the options market and, more importantly, is driven by their predictive information about a firm's fundamentals, particularly for profitability. Overall, our results indicate that options-implied information is useful in identifying the momentum stages of stocks. |
URI: | https://scholars.lib.ntu.edu.tw/handle/123456789/612066 | ISSN: | 1386-4181 | DOI: | 10.1016/j.finmar.2020.100565 |
Appears in Collections: | 財務金融學系 |
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