Implied volatilities and Euro Stoxx 50 returns.
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2017-07-28
Language
en
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Abstract
The volatility smile may be an indication of the presence of informed traders and therefore may have predictive power for future stock returns. This thesis reports results of an analysis of the predictability of the volatility smirk present in call and in put options on stocks that make up the Euro Stoxx 50. A Fama-Macbeth regression is applied and subsequently portfolios based on differences in implied volatility are constructed. In this sample, the information in the volatility smirk harnesses no significant predictive power for future stock returns.
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Faculteit der Managementwetenschappen