Abstract

http://ssrn.com/abstract=2288910
 
 

References (30)



 


 



Gambling Preferences, Options Markets, and Volatility


Benjamin M. Blau


Utah State University - Huntsman School of Business

Boone Bowles


University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Ryan J. Whitby


Utah State University - Huntsman School of Business

2016

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

Abstract:     
Despite assumptions of mean-variance efficiency that underlie most asset pricing models, investors have shown a penchant for positive skewness. This study documents that the ratio of call option volume relative to total option volume is greatest for stocks with return distributions that resemble lotteries. These results suggest that investors’ preferences for lottery-type stocks might be reflected in the level of call option volume. Perhaps, more importantly, we test whether these preferences affect future spot price volatility. Consistent with our expectation, we find that preferences for lotteries by call option traders directly affect future volatility in the underlying asset.

Number of Pages in PDF File: 38

Keywords: options, lotteries, volatility

JEL Classification: G10, G14, G19


Open PDF in Browser Download This Paper

Date posted: July 3, 2013 ; Last revised: February 1, 2016

Suggested Citation

Blau, Benjamin M. and Bowles, Boone and Whitby, Ryan J., Gambling Preferences, Options Markets, and Volatility (2016). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2288910 or http://dx.doi.org/10.2139/ssrn.2288910

Contact Information

Benjamin M. Blau (Contact Author)
Utah State University - Huntsman School of Business ( email )
3500 Old Main Hill
Logan, UT 84322
United States
T. Boone Bowles
University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States

Ryan J. Whitby
Utah State University - Huntsman School of Business ( email )
3500 Old Main Hill
Logan, UT 84322-3500
United States
435.797.9495 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 427
Downloads: 61
Download Rank: 266,891
References:  30

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.250 seconds