Investor Sentiment and Option Prices

2005 ◽  
Author(s):  
Bing Han
Keyword(s):  
Investor Sentiment ◽  
Option Prices

Investor Sentiment and Option Prices

2007 ◽  
Vol 21 (1) ◽  
pp. 387-414 ◽  
Author(s):  
Bing Han
Keyword(s):  
Investor Sentiment ◽  
Option Prices

How Does Investor Sentiment Affect Implied Risk-Neutral Distributions of Call and Put Options?

2015 ◽  
Vol 18 (02) ◽  
pp. 1550010 ◽  
Author(s):  
Wen-Ming Szu ◽  
Yi-Chen Wang ◽  
Wan-Ru Yang
Keyword(s):  
Asset Prices ◽  
Investor Sentiment ◽  
Stock Index ◽  
Option Prices ◽  
Differential Impact ◽  
Underlying Asset ◽  
Put Options ◽  
Put Option ◽  
Risk Neutral ◽  
Skewness And Kurtosis

This paper investigates the characteristics of implied risk-neutral distributions separately derived from Taiwan stock index call and put options prices. Differences in risk-neutral skewness and kurtosis between call and put options indicate deviations from put-call parity. We find that the sentiment effect is significantly related to differences between call and put option prices. Our results suggest the differential impact of investor sentiment and consumer sentiment on call and put option traders' expectations about underlying asset prices. Moreover, rational and irrational sentiment components have different influences on call and put option traders' beliefs.

Influence of individual investor sentiment on Taiwan option prices during 2007-2010 financial crisis

2015 ◽  
Vol 41 (5) ◽  
pp. 437-464 ◽  
Author(s):  
Wen-Ming Szu ◽  
Wan-Ru Yang
Keyword(s):  
Confidence Interval ◽  
Investor Sentiment ◽  
Stock Index ◽  
Option Prices ◽  
Individual Investor ◽  
Content Type ◽  
The Us ◽  
Risk Neutral ◽  
The Impact ◽  
Option Market

Purpose – This paper investigates changes in risk-neutral distribution derived from Taiwan stockindex options under different market conditions. The purpose of this paper is to explore whether individual investor sentiment significantly influences the Taiwan option prices. Design/methodology/approach – The authors adopt the optimization method to estimate the risk-neutral distribution from the Taiwan stock index options and use the t-test to examine the difference in risk-neutral skewness, kurtosis, and confidence interval between the pre-crisis and crisis periods. This paper tests the impact of individual investor sentiment on risk-neutral skewness and confidence interval in two sub-periods. Findings – The authors find that errors in individual investors’ expectations significantly influence the Taiwan stock index option prices. Research limitations/implications – The data concerning the sentiment of speculative institutional investors are incomplete for the Taiwan option market. Therefore, this paper focusses on the analysis of individual investor sentiment. Further research can study the impact of institutional investor sentiment in emerging markets. Social implications – The previous literature has suggested that option prices reflect information before the information is revealed in stock prices. Therefore, an important implication is to analyze the information quality revealed in option prices by studying whether the changes in option prices are due to investor sentiment or non-sentiment-related components. Originality/value – Most of the studies in the literature have focussed on the US option market, and their applicability may vary across different microstructures. This paper shows that the influence of individual investor sentiment in an emerging market is different from that in the US market.

Stock Return Extrapolation, Option Prices, and Variance Risk Premium

2021 ◽  
Author(s):  
Adem Atmaz
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Stock Return ◽  
Dynamic Equilibrium ◽  
Investor Sentiment ◽  
Option Prices ◽  
Market Returns ◽  
Stock Market Returns ◽  
Variance Risk Premium ◽  
Variance Risk

Abstract This paper presents a tractable dynamic equilibrium model of stock return extrapolation in the presence of stochastic volatility. In the model, consistent with survey evidence, investors expect future returns to be higher (lower) but also less (more) volatile following positive (negative) stock returns. The biased volatility expectation introduces a new channel through which past returns and investor sentiment affect derivative prices. In particular, through this novel channel, the model reconciles the otherwise puzzling evidence of past returns affecting option prices and the evidence of variance risk premium predicting future stock market returns even after controlling for the realized variance.

Market Response to Dividend Announcement based on Investor Sentiment: Approach on Behavioral Finance Perspective

2020 ◽  
Vol 35 (1) ◽  
pp. 117-144
Author(s):  
Byung－Jin Yim ◽  
Ji－Hun Heo
Keyword(s):  
Behavioral Finance ◽  
Investor Sentiment ◽  
Market Response

The Effect of Underreaction and Overreaction of Firm Stocks to Firm Valuation: Data from the Indonesian Stock Exchange

2019 ◽  
Author(s):  
Yohanes Indrayono
Keyword(s):  
Behavioral Finance ◽  
Firm Value ◽  
Intangible Assets ◽  
Stock Exchange ◽  
Investor Sentiment ◽  
Firm Valuation ◽  
Good News ◽  
Industrial Sectors ◽  
Tangible Assets ◽  
Firm Profitability

<p>This study contributes to the on-going studies on behavioral finance by providing a case study on underreaction and overreaction of firm stocks to firm valuation. We use the Model of Investor Sentiment (Barberis et al., 2005) to evaluate underreaction and overreaction behavior and reflect on specific findings in the Indonesian market. The result of the study is most of the stocks in the Indonesian Stock Exchange are more overreaction to the news of firm financial statements. Firms on the industry with more intangible assets measure more overreaction than firms on industries with more tangible assets. For stocks with overreaction, the stock firm value is positively affected by a change in the total assets and profitability, but not by change of book value. The result concretized no evidence that firm stocks overreacted to the news more than underreacting. In stock industrial sectors, the financial institutions and wholesale industry stocks demonstrated remarkable overreactions. Nonetheless, automotive, building construction, food and beverage as well as cement evidenced more underreaction. For better return in financial markets, investors may buy stocks of the firm on industry with more tangible assets when there is no good news about the increasing firm profitability and sales; nonetheless, they should buy stocks of the firm on industry with more intangible assets when there is no lousy news about the increasing firm profitability and sales. </p>

INVESTOR SENTIMENT AND ASSET PRICING: A REVIEW

2018 ◽  
Vol 3 (1) ◽  
Author(s):  
C. GUNATHILAKA
Keyword(s):  
Asset Pricing ◽  
Investor Sentiment

Estimating the tail shape parameter from option prices

2017 ◽  
Vol 19 (6) ◽  
pp. 85-110 ◽  
Author(s):  
Kam Hamidieh
Keyword(s):  
Shape Parameter ◽  
Option Prices ◽  
Tail Shape

Exercise boundaries and efficient approximations to American option prices and hedge parameters

2001 ◽  
Vol 4 (4) ◽  
pp. 4-4 ◽  
Author(s):  
Farid AitSahlia ◽  
Tze Leung Lai
Keyword(s):  
American Option ◽  
Option Prices
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