How Does Investor Sentiment Affect Implied Risk-Neutral Distributions of Call and Put Options?-Reference-Cited by-同舟云学术

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

Published:2015-06 Issue:02 Volume:18 Page:1550010
ISSN:0219-0915
Container-title:Review of Pacific Basin Financial Markets and Policies
language:en
Short-container-title:Rev. Pac. Basin Finan. Mark. Pol.

Author:

Szu Wen-Ming¹,Wang Yi-Chen¹,Yang Wan-Ru²

Affiliation:

1. Department of Money and Banking, National Kaohsiung First University of Science and Technology, Taiwan

2. Department of Finance, National University of Kaohsiung, Taiwan

Abstract

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.

Publisher

World Scientific Pub Co Pte Lt

Subject

Economics and Econometrics,Finance

Link

https://www.worldscientific.com/doi/pdf/10.1142/S0219091515500101

Reference32 articles.

1. Stock salience and the asymmetric market effect of consumer sentiment news

2. Option Implied Moments: An Application to Nikkei 225 Futures Options

3. Deviations from Put-Call Parity and Stock Return Predictability

4. Investor Sentiment and the Cross-Section of Stock Returns

5. Volatility Spreads and Expected Stock Returns

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