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Option-implied information and stock herding

Verousis, Thanos, Voukelatos, Nikolaos (2019) Option-implied information and stock herding. International Journal of Finance & Economics, 24 (4). pp. 1429-1442. ISSN 1076-9307. E-ISSN 1099-1158. (doi:10.1002/ijfe.1741) (KAR id:74111)

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Abstract

In this paper, we examine if herding behavior in the equity market can be explained by option-implied information. Our empirical results confirm the commonly reported absence of herding as a general tendency in the US equity market. However, we find evidence of significant herding behavior during periods when option-implied information reflects a pessimistic view about the future prospects of the equity market. More specifically, we find that individual stock returns tend to cluster more closely around the market consensus during days of high implied index volatility, more pronounced negative implied skewness and higher trading volume in index puts.

Item Type: Article
DOI/Identification number: 10.1002/ijfe.1741
Uncontrolled keywords: herding; cross-sectional dispersion; options; market stress
Subjects: H Social Sciences > HG Finance
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Nikolaos Voukelatos
Date Deposited: 27 May 2019 08:37 UTC
Last Modified: 07 Oct 2021 13:42 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/74111 (The current URI for this page, for reference purposes)
Voukelatos, Nikolaos: https://orcid.org/0000-0001-8272-2901
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