Normal view MARC view

An Empirical portfolio perspective on option pricing anomalies

Author: Driessen, Joost ; Maenhout, PascalINSEAD Area: FinanceIn: Review of Finance, vol. 11, no. 4, 2007 Language: EnglishDescription: p. 561-603.Type of document: INSEAD ArticleNote: Please ask us for this itemAbstract: We empirically study the economic benefits of giving investors access to index options in the standard portfolio problem, analyzing both expected-utility and nonexpected-utility investors in order to understand who optimally buys and sells options. Using data on SP 500 index options, CRRA investors find it always optimal to short out-of-the-money puts and at-the-money straddles. The option positions are economically and statistically significant and robust to corrections for transaction costs, margin requirements, and Peso problems. Loss-averse and disappointment-averse investors also optimally hold short option positions. Only with highly distorted probability assessments can we obtain positive portfolio weights for puts (cumulative prospect theory and anticipated utility) and straddles (anticipated utility)
Tags: No tags from this library for this title. Log in to add tags.
Item type Current location Call number Status Date due Barcode Item holds
INSEAD Article Europe Campus
Available BC008157
Total holds: 0

Ask Qualtrics

We empirically study the economic benefits of giving investors access to index options in the standard portfolio problem, analyzing both expected-utility and nonexpected-utility investors in order to understand who optimally buys and sells options. Using data on SP 500 index options, CRRA investors find it always optimal to short out-of-the-money puts and at-the-money straddles. The option positions are economically and statistically significant and robust to corrections for transaction costs, margin requirements, and Peso problems. Loss-averse and disappointment-averse investors also optimally hold short option positions. Only with highly distorted probability assessments can we obtain positive portfolio weights for puts (cumulative prospect theory and anticipated utility) and straddles (anticipated utility)

Digitized

There are no comments for this item.

Log in to your account to post a comment.
Koha 18.11 - INSEAD Catalogue
Home | Contact Us | What's Koha?