{"title":"Option gamma and stock returns","authors":"Amar Soebhag","doi":"10.1016/j.jempfin.2023.101442","DOIUrl":null,"url":null,"abstract":"<div><p>Stocks with high net gamma exposure systematically underperform stocks with low net gamma exposure. This effect is distinct from other well-known return predictors, and survives many robustness checks. We show that stocks with low net gamma exposure negatively predict future realized volatility, and argue that investors command a risk premium to hold low net gamma exposure stocks, which are riskier. Lastly, we show that the volatility predictability stems from a non-informational channel, and not from private information.</p></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"74 ","pages":"Article 101442"},"PeriodicalIF":2.1000,"publicationDate":"2023-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0927539823001093/pdfft?md5=2b497eaa12643692e3176f8490377fb1&pid=1-s2.0-S0927539823001093-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Empirical Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0927539823001093","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Stocks with high net gamma exposure systematically underperform stocks with low net gamma exposure. This effect is distinct from other well-known return predictors, and survives many robustness checks. We show that stocks with low net gamma exposure negatively predict future realized volatility, and argue that investors command a risk premium to hold low net gamma exposure stocks, which are riskier. Lastly, we show that the volatility predictability stems from a non-informational channel, and not from private information.
期刊介绍:
The Journal of Empirical Finance is a financial economics journal whose aim is to publish high quality articles in empirical finance. Empirical finance is interpreted broadly to include any type of empirical work in financial economics, financial econometrics, and also theoretical work with clear empirical implications, even when there is no empirical analysis. The Journal welcomes articles in all fields of finance, such as asset pricing, corporate finance, financial econometrics, banking, international finance, microstructure, behavioural finance, etc. The Editorial Team is willing to take risks on innovative research, controversial papers, and unusual approaches. We are also particularly interested in work produced by young scholars. The composition of the editorial board reflects such goals.