Investor Sentiments and Return Predictability of Put-call Parity Deviation

• Main Authors: Cheng, Ying-Chen, 鄭盈甄
• Other Authors: Chen, Chao-Chun
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/57096876003549736044

碩士 === 東海大學 === 財務金融學系 === 102 === Because of the properties concerning high leverage and low trading costs in option markets, informed investors usually trade in option markets before trading in stock markets. Accordingly, option prices are expected to carry information about future stock price movements. This study adopts the difference between implied volatility of paired call and put options, volatility spreads, to investigate whether deviations from put-call parity predict the future price movements of the underlying asset. The empirical results indicate that the return predictability of volatility spreads is significantly related to investor sentiments. Moreover, we also find that high investor sentiments reduce the predictability of volatility spreads. Contrarily, the predictability is stable and significant during low investor sentiments.