초록
영어
This paper examines the effect of analyst stock recommendations on equity option market activity in US over the 1996 to 2002 period. I find that the implied volatilities of recommended stocks gradually increase up to the recommendation revision date and stay at the increased level after the revision, especially following downgrades. This pattern, however, seems to reflect changes in the past realized volatilities more than ex post future realized volatilities, indicating that option market may be overreacting to recommendation revisions. A delta hedged trading strategy that shorts call options on recommendation revision date yields significant positive profits before transaction costs, supporting the overreaction hypothesis. Analysis of cumulative returns and abnormal trading volume prior to the revision further suggests that there is more information trading in option market than in stock market.
목차
Ⅰ. Introduction
Ⅱ. Data and sample
Ⅲ. Changes in implied and realized volatility around recommendation revision date
1. Issues regarding measurement of implied volatility
2. Changes in implied volatility：±10 day event time analysis around revision date
3. Comparing implied volatility with realized volatility
4. Interpretation of the empirical results
Ⅳ. Additional analysis of information trading in option market
1. Cumulative buy-and-hold abnormal returns around recommendation revision
2. Trading volume and open interest around recommendation revision
3. Bid-ask spread changes around recommendation revision date
V. Robustness checks
1. Excluding corporate announcement dates
2. Excluding overlapping or multiple revisions
3. Changes in net implied volatility against matched sample of control firms
Ⅵ. Additional analysis of overreaction：gains to delta-hedged trading strategy
Ⅶ. Conclusion
References