Toggle Main Menu Toggle Search

Open Access padlockePrints

The Newcastle University research output collection, currently available on ePrints, will shortly be moving to a new open repository platform, Figshare. To prepare for the data migration we have paused adding new content to ePrints, and will resume once the new repository is launched. During this time you will continue to have access to ePrints (but no new content will appear). We will share updates here when available.

Put-Call Disparity and Stock Returns: Cross-Section and Time Series Effects

Lookup NU author(s): Dr Minh NguyenORCiD

Downloads

Full text for this publication is not currently held within this repository. Alternative links are provided below where available.

Abstract

This study examines a market-wide liquidity measure based on the systematic deviations from Put-Call parity in the U.S. equity option markets. We show that this implied liquidity measure provides forward-looking information about market returns and significantly explains the cross-sectional variations of stock returns. We show that investing in the stocks with the largest exposure to the innovations in the implied liquidity and shorting the stocks with the smallest generate significant returns of about $7.3$ percent per annum. The explanatory power of implied liquidity for the cross-sectional variations of stock returns remain robust after controlling for various liquidity influences, the short-selling constraints and the effects of information asymmetry.

Publication metadata

Author(s): Nguyen M, Yang Y

Publication type: Article

Publication status: Submitted

Journal: Journal of Financial Research

Year: 2021

Notes: Revised and Submitted.

Share