TY - JOUR
T1 - Attention
T2 - Implied Volatility Spreads and Stock Returns
AU - Gao, Xuechen
AU - Wang, Xuewu
AU - Yan, Zhipeng
N1 - Publisher Copyright:
© 2019 The Institute of Behavioral Finance.
PY - 2020/10/1
Y1 - 2020/10/1
N2 - Using a new and direct measure of investor attention generated from the SEC’s EDGAR log files, we revisit the stock return predictability of call-put implied volatility spread through the lens of investor attention. We find that as investor attention heightens, the volatility spread return predictability becomes more pronounced, providing favorable evidence for the informed trading hypothesis as opposed to the mispricing hypothesis. More importantly, we document the construction and profitability of spread-and-high-attention portfolios. A portfolio that goes long on stocks with the highest investor attention and the highest volatility spread and short on stocks with the highest attention and the lowest volatility spread generates a Fama-French 5-factor monthly alpha of 2.43%.
AB - Using a new and direct measure of investor attention generated from the SEC’s EDGAR log files, we revisit the stock return predictability of call-put implied volatility spread through the lens of investor attention. We find that as investor attention heightens, the volatility spread return predictability becomes more pronounced, providing favorable evidence for the informed trading hypothesis as opposed to the mispricing hypothesis. More importantly, we document the construction and profitability of spread-and-high-attention portfolios. A portfolio that goes long on stocks with the highest investor attention and the highest volatility spread and short on stocks with the highest attention and the lowest volatility spread generates a Fama-French 5-factor monthly alpha of 2.43%.
UR - http://www.scopus.com/inward/record.url?scp=85075458445&partnerID=8YFLogxK
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U2 - 10.1080/15427560.2019.1692846
DO - 10.1080/15427560.2019.1692846
M3 - Article
AN - SCOPUS:85075458445
SN - 1542-7560
VL - 21
SP - 385
EP - 398
JO - Journal of Behavioral Finance
JF - Journal of Behavioral Finance
IS - 4
ER -