Holding Period Effects in Dividend Strip Returns

Golez, Benjamin; Jackwerth, Jens Carsten

doi:10.2139/ssrn.4015723

Cited by 3 publications

(2 citation statements)

References 33 publications

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“…One of the critiques of BBK is that their results may be sensitive to the proxy for the interest rates used in the calculation of dividend strip prices (Song 2016). Therefore, we additionally obtain the dividend strip price data from Golez and Jackwerth (2022). They estimate dividend strip prices in the same way as BBK, except that they use the interest rate implied by option prices (van Binsbergen, Diamond, and Grotteria 2022).…”

Section: Equity Term Structurementioning

confidence: 99%

“…A potential concern is that dividend strip prices depend on the assumed risk-free rate (Song 2016). To address this concern, we obtain data from Golez and Jackwerth (2022), who reestimate BBK dividend strip prices using the endogenous interest rate implied by option prices. Column 3 reports the results.…”

Section: Use Of Options Data To Calculate the Equity Term Premiummentioning

confidence: 99%

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Horizon Bias and the Term Structure of Equity Returns

Cassella

Golez

Gulen

et al. 2022

The Review of Financial Studies

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We label the degree to which individuals are more optimistic at long horizons relative to short horizons as the horizon bias. We examine whether time-series variation in the horizon bias can explain the time-series variation in the equity term structure. We use analyst earnings forecasts to measure the degree of the horizon bias in the stock market. Consistent with the intuition from a stylized present value model, we find that periods of above-average horizon bias are associated with negative term premiums, whereas periods of below-average horizon bias are associated with positive term premiums.

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Section: Equity Term Structurementioning

confidence: 99%

Section: Use Of Options Data To Calculate the Equity Term Premiummentioning

confidence: 99%

Horizon Bias and the Term Structure of Equity Returns

Cassella

Golez

Gulen

et al. 2022

The Review of Financial Studies

Self Cite

View full text Add to dashboard Cite

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Implied volatility surfaces: a comprehensive analysis using half a billion option prices

Ulrich,

Zimmer,

Merbecks

2023

Rev Deriv Res

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This study delves into the critical aspect of accurately estimating single stock volatility surfaces, a task indispensable for option pricing, risk management, and empirical asset pricing. Utilizing a comprehensive dataset consisting of half a billion daily price observations for options on 499 US individual stocks and the S&P 500, the research investigates the accuracy of diverse methods for constructing volatility surfaces. The comparative evaluation of the three-dimensional kernel smoother by OptionMetrics (IvyDB US file and data reference manual, version 5.2, Rev. 01/27/2022, Computer software manual, New York, 2022), the semi-parametric spline by Figlewski (in: Robert F. Engle (ed) Estimating the implied risk neutral density. Volatility and time series econometrics: Essays in honor, Oxford University Press, Oxford, 2008), and a refined one-dimensional kernel smoother reveals the distinct superiority of the latter. This method consistently outperforms its counterparts across all moneyness, maturity, and liquidity categories, with markedly lower error metrics. The study further uncovers significant distortions in the extraction of Bakshi et al. (Rev Financ Stud 16:101–143, 2003) moments and skewness spanning induced by the noise-infused three-dimensional kernel smoother, which could potentially mislead derivative pricing and trading decisions. The findings offer valuable insights to traders, risk managers, investors, and researchers, suggesting a robust, one-size-fits-all method for crafting more accurate and less noisy volatility predictions. The research advances our understanding of option-implied information, its extraction, and broader implications for financial markets.

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On a robust estimation of option-implied interest rates and dividend yields

Kamau,

Mwaniki

2023

Cogent Economics & Finance

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Holding Period Effects in Dividend Strip Returns

Cited by 3 publications

References 33 publications

Horizon Bias and the Term Structure of Equity Returns

Horizon Bias and the Term Structure of Equity Returns

Implied volatility surfaces: a comprehensive analysis using half a billion option prices

On a robust estimation of option-implied interest rates and dividend yields

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