À繫¿¬±¸ Á¦ ±Ç È£ (2013³â 5¿ù)
Asian Review of Financial Research, Vol., No..
pp.1643~1709
pp.1643~1709
Improving the predictability of stock market returns with the growth of options open interest
Suk Joon Byun Korea Advanced Institute of Science and Technology
Jun Sik Kim Korea Advanced Institute of Science and Technology
The purpose of this paper is to show that the growth of options open interest has predictive power for stock market returns. Predictability is demonstrated through in-sample tests, as evidenced by significant p-values and the improvement of adjusted R2 in monthly predictive regressions, and out-of-sample metrics. In addition, the stock return predictability confirms the economic significance, as shown by improving Sharpe ratios of returns from a predictor variablebased decision rule that exploit the growth of options open interest. Our empirical evidence indicates that the growth of options open interest contains additional information for future stock market returns, relative to other popular predictor variables.
Suk Joon Byun
Jun Sik Kim
The purpose of this paper is to show that the growth of options open interest has predictive power for stock market returns. Predictability is demonstrated through in-sample tests, as evidenced by significant p-values and the improvement of adjusted R2 in monthly predictive regressions, and out-of-sample metrics. In addition, the stock return predictability confirms the economic significance, as shown by improving Sharpe ratios of returns from a predictor variablebased decision rule that exploit the growth of options open interest. Our empirical evidence indicates that the growth of options open interest contains additional information for future stock market returns, relative to other popular predictor variables.
Options Open Interest,Predictability,Stock market returns