Momentum Strategies on Optioned and Non-Optioned Stocks

Journal of American Academy of Business, 2008

Posted: 29 Dec 2008 Last revised: 11 Jan 2011

See all articles by Keh Yiing Chern

Keh Yiing Chern

Willow Bridge Asset Management

Susana Yu

Iona College

Kishore Tandon

CUNY Baruch College - Zicklin School of Business

Date Written: March 28, 2008

Abstract

As implied by Mayhew and Mihov (2004), an ideal control sample of non-optioned stocks used in comparing or contrasting to optioned stocks must consider the liquidity and the volatility of these stocks. Following this and the study by Chan, Jegadeesh, and Lakonishok (1996), we study price and earnings momentum strategies on both optioned stocks and selected non-optioned stocks over 1983 to 2002. The purpose is to examine whether information issued by or related to non-optioned stocks have more information contents than similar information regarding optioned stocks. We find that both price and earnings momentum strategies can be applied more successfully in the sample of non-optioned stocks than in the sample of optioned stocks. This better performance in the sample of non-optioned stocks is associated with the wider spread of earnings estimate revisions between the winning portfolio and the losing portfolio, an indication of a richer information content regarding the sample of non-optioned stocks than that of the sample of optioned stocks.

Keywords: Options, Trading Strategies

JEL Classification: G11

Suggested Citation

Chern, Keh Yiing and Yu, Susana and Tandon, Kishore, Momentum Strategies on Optioned and Non-Optioned Stocks (March 28, 2008). Journal of American Academy of Business, 2008. Available at SSRN: https://ssrn.com/abstract=1321324

Keh Yiing Chern

Willow Bridge Asset Management ( email )

No Address Available
United States

Susana Yu (Contact Author)

Iona College ( email )

715 North Avenue
New Rochelle, NY 10801
United States

Kishore Tandon

CUNY Baruch College - Zicklin School of Business ( email )

55 Lexington Avenue
New York, NY 10010
United States
(646) 312-3468 (Phone)
(646) 312-3451 (Fax)

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