Investor Attention and Option Returns

Management Science, forthcoming

85 Pages Posted: 20 Mar 2018 Last revised: 1 Sep 2022

See all articles by Siu Kai Choy

Siu Kai Choy

King's College London

Jason Zhanshun Wei

University of Toronto - Rotman School of Management

Date Written: June 14, 2022


This paper examines the attention effect in the options market. We show that option investors (especially retail investors) buy more calls and puts on both daily winner and loser stocks, and this buying pressure leads to an overvaluation as shown in subsequent lower hedged returns. The overvaluation is due to a combination of differences of opinion, risk-aversion, and margin requirements. The economic magnitude is large. For instance, a zero-financing portfolio involving options on loser stocks renders an alpha of 2.90% per month. Aside from contributing to the broad literature of investor attention versus asset returns, our study also sheds light on an important yet largely neglected topic: the impact of margins on option trading and pricing.

Keywords: Investor attention, daily winners and losers, salience, overpricing, option returns

JEL Classification: G14

Suggested Citation

Choy, Siu Kai and Wei, Jason Zhanshun, Investor Attention and Option Returns (June 14, 2022). Management Science, forthcoming, Available at SSRN: or

Siu Kai Choy (Contact Author)

King's College London ( email )

Bush House, Kings Business School
30 Aldwych
London, WC2B 4BG
United Kingdom

Jason Zhanshun Wei

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
416-978-3698 (Phone)
416-971-3048 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics