[2007년 제 4차] Analyst Recommendations and Option Market Reactions
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조회수 : 829
게시일 :
2007-12-14
This paper examines the effect of analyst stock recommendations on equity option market activity in US over the 1996 to 2002 period. I find that the implied volatilities of recommended stocks gradually increase up to the recommendation revision date and stay at the increased level after the revision for both upgrades and downgrades. However, this pattern of implied volatility movement in option market is not justified by the ex post realized volatility in the stock market. Cumulative buy and hold abnormal returns on both calls and puts also start to increase as far as 10 trading days before the revision date regardless of the direction of the revision, whereas underlying stocks exhibit little pre revision activity. The results are robust to the exclusion of important corporate announcement dates. A delta hedged trading strategy that shorts call options on recommendation revision date yields significant positive profits before transaction costs. The evidence suggests that there is more information trading in option market than in stock market and volatility underlying the stock price process may not be constant. Overall, options do not seem to be redundant securities.