Abstract

http://ssrn.com/abstract=1572269
 
 

References (48)



 
 

Citations (1)



 


 



How the 52-Week High and Low Affect Option-Implied Volatilities and Stock Return Moments


Joost Driessen


Tilburg University - Department of Finance; CentER Tilburg University

Tse-Chun Lin


University of Hong Kong

Otto Van Hemert


IMC Asset Management

July 8, 2011

Review of Finance, Forthcoming

Abstract:     
We provide a new perspective on option and stock price behavior around 52-week highs and lows. We analyze whether option-implied volatilities change when stock prices approach or break through their 52-week high or low. We also study the effects of highs and lows on a stock's beta and return volatility. We find that implied volatilities and stock betas decrease when approaching a high or low, and that volatilities increase after breakthroughs. The effects are economically large and significant. The approach results can be explained by the anchoring theory. The breakthrough results are consistent with anchoring and the investor attention hypothesis.

Number of Pages in PDF File: 47

Keywords: 52-week high, 52-week low, implied volatility, beta, volatility, anchoring, prospect theory, investor attention, barrier, support level, resistance level

JEL Classification: G12, G14

working papers series





Download This Paper

Date posted: March 22, 2010 ; Last revised: July 9, 2011

Suggested Citation

Driessen, Joost and Lin, Tse-Chun and Van Hemert, Otto, How the 52-Week High and Low Affect Option-Implied Volatilities and Stock Return Moments (July 8, 2011). Review of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1572269 or http://dx.doi.org/10.2139/ssrn.1572269

Contact Information

Joost Driessen (Contact Author)
Tilburg University - Department of Finance ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
CentER Tilburg University ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Tse-Chun Lin
University of Hong Kong ( email )
Pokfulam Road
Hong Kong, Pokfulam HK
China
Otto Van Hemert
IMC Asset Management ( email )
Feedback to SSRN


Paper statistics
Abstract Views: 3,894
Downloads: 869
Download Rank: 14,469
References:  48
Citations:  1
People who downloaded this paper also downloaded:
1. Consumer Sentiment and the Stock Market
By Maria Otoo

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.438 seconds