Investor Sentiment and Option Prices

Han, Bing

doi:10.1093/rfs/hhm071

Cited by 311 publications

(181 citation statements)

References 49 publications

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“…A similar relationship has also been documented between investor sentiment and corporate bonds (Nayak, 2010) and investor sentiment and the options market (Han, 2007). In this article, I investigate (1) whether aggregate investor sentiment from the equity market impacts the commodity futures markets, (2) whether this impact is symmetric and (3) whether this impact varies with time.…”

Section: Introductionmentioning

confidence: 65%

The linkage between aggregate stock market investor sentiment and commodity futures returns

Zheng

2014

Applied Financial Economics

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This article investigates the predictive content of aggregate stock market investor sentiment on the returns of commodity futures. The sample consists of four subcategories: agricultural, livestock, energy and metal futures, for a total of 26 commodity futures spanning from the period 1968 to 2010. Overall, commodity futures perform better when investor sentiment is pessimistic rather than optimistic. The asymmetrical response to sentiment shocks may partially account for this difference. Cross-sectional analysis indicates a persistent negative relationship between investor sentiment and commodity futures returns, even after controlling for the effects of liquidity and open interest. Additional analysis shows that when conditional volatilities are high, the negative relationship between investor sentiment and commodity futures returns becomes more pronounced.

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Section: Introductionmentioning

confidence: 65%

The linkage between aggregate stock market investor sentiment and commodity futures returns

Zheng

2014

Applied Financial Economics

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“…Following studies that investigate long-short S&P 500 futures (Chen & Wang, 2010;Han, 2008), Long-short S&P 500 futures (SentLS) is the net position of large speculators in S&P 500…”

Section: Long-short Sandp 500 Futuresmentioning

confidence: 99%

Investor Sentiment and Credit Default Swap Spreads During the Global Financial Crisis

Lee

Kim

Park

2016

Journal of Futures Markets

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This paper examines whether investor sentiment can predict credit default swap (CDS) spread changes. Among several proxies for investor sentiment, change in equity put–call ratio performs best in predicting variation in CDS spread changes in both firm‐ and portfolio‐level regressions; in particular, the explanatory power of this proxy is greater for non‐investment‐grade firms than for investment‐grade firms. More importantly, sentiment may be a critical factor in determining CDS spread changes during the global financial crisis and may best explain the differences in CDS spread in the group of firms whose leverage ratio and stock volatility are highest. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 37:660–688, 2017

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“…A major difference, however, between our study and those that have gone before, is that the earlier studies specifically examined the informational role of options, whereas in the present study, we investigate the ways in which investor beliefs affect option demand pressure. 8 See, for example, Whaley (2000), Amin, Coval, and Seyhun (2004), Han (2008), and Rehman and Vilkov (2012). 9 Amin et al (2004) used skewness under a true measure to describe the level of pessimism amongst investors, whilst Han (2008) noted that with an increase in bearish market sentiment, there was a corresponding reduction in the risk-neutral skewness of the index returns.…”

Section: Introductionmentioning

confidence: 99%

“…8 See, for example, Whaley (2000), Amin, Coval, and Seyhun (2004), Han (2008), and Rehman and Vilkov (2012). 9 Amin et al (2004) used skewness under a true measure to describe the level of pessimism amongst investors, whilst Han (2008) noted that with an increase in bearish market sentiment, there was a corresponding reduction in the risk-neutral skewness of the index returns. Based on their analysis of the risk-neutral probability density function in the S&P 500 index, Jackwerth and Rubinstein (1996) determined that after the 1987 crash, the probability of a subsequent US stock market crash was approximately ten times higher than that for normal distribution; this phenomenon is now referred to as "crash-o-phobia."…”

Section: Introductionmentioning

confidence: 99%

Investor Beliefs and the Demand Pressure on Index Options in Taiwan

Pan

Shiu

2014

Journal of Futures Markets

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The effects of demand pressure on option prices have already been well documented within the extant literature; however, little appears to be known with regard to where the demand pressure on options originates. We set out in the present study to examine the ways in which investor beliefs affect the demand pressure on TAIEX options, employing forward‐looking risk‐neutral index distributions to evaluate such beliefs. Our examination of 2005–2012 high‐frequency data reveals that with an increase in the level of market fear amongst investors, there will be a corresponding rise in the demand for options, with greater pessimism amongst investors resulting in weaker (stronger) demand for calls (puts). Furthermore, during the 2008 financial crisis, the soaring market atmosphere, and the fears of a market crash which soon followed, clearly had dominating effects on demand pressure, with an increase (reduction) in demand pressure for call (put) options being discernible during the bullish sentiment period, and vice versa amid the subsequent fears of a market crash. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:1117–1132, 2015

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Investor Sentiment and Option Prices

Cited by 311 publications

References 49 publications

The linkage between aggregate stock market investor sentiment and commodity futures returns

The linkage between aggregate stock market investor sentiment and commodity futures returns

Investor Sentiment and Credit Default Swap Spreads During the Global Financial Crisis

Investor Beliefs and the Demand Pressure on Index Options in Taiwan

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