Analyst Recommendations and Option Market ReactionsAnalyst Recommendations and Option Market Reactions
- Other Titles
- Analyst Recommendations and Option Market Reactions
- Authors
- 김우진
- Issue Date
- 2008
- Publisher
- 한국재무학회
- Keywords
- Analyst Recommendations; Implied Volatility; Option Market Overreaction
- Citation
- 재무연구, v.21, no.1, pp.131 - 180
- Indexed
- KCI
- Journal Title
- 재무연구
- Volume
- 21
- Number
- 1
- Start Page
- 131
- End Page
- 180
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/125005
- ISSN
- 1229-0351
- Abstract
- 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.
- Files in This Item
- There are no files associated with this item.
- Appears in
Collections - Korea University Business School > Department of Business Administration > 1. Journal Articles
Items in ScholarWorks are protected by copyright, with all rights reserved, unless otherwise indicated.