Arbeitspapier

A new predictor of real economic activity: The S&P 500 option implied risk aversion

zu Verbundenen Objekten

We propose a new predictor of real economic activity (REA), namely the representative investor's implied relative risk aversion (IRRA) extracted from S&P 500 option prices. IRRA exploits the forward-looking information in option prices. It increases as risk averse investors enter the market, leading to a decrease in market risk premium thus predicting a REA improvement. In line with our hypothesis, IRRA predicts U.S. REA even when we control for well-known REA predictors. Results hold over both short and long horizons and regardless of the way we conduct inference. Moreover, IRRA forecasts REA out-of-sample over the 2008-2009 great economic recession peak.

Sprache
Englisch

Erschienen in
Series: Working Paper ; No. 741

Klassifikation
Wirtschaft
Financial Markets and the Macroeconomy
Contingent Pricing; Futures Pricing; option pricing
Financial Forecasting and Simulation
Thema
Option prices
Risk aversion
Risk-neutral moments
Real Economic Activity

Ereignis
Geistige Schöpfung
(wer)
Sarantopoulou-Chiourea, Sylvia
Skiadopoulos, George
Ereignis
Veröffentlichung
(wer)
Queen Mary University of London, School of Economics and Finance
(wo)
London
(wann)
2015

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Original beim Datenpartner anzeigen

Objekttyp

  • Arbeitspapier

Beteiligte

  • Sarantopoulou-Chiourea, Sylvia
  • Skiadopoulos, George
  • Queen Mary University of London, School of Economics and Finance

Entstanden

  • 2015

Ähnliche Objekte (12)

A new predictor of U.S. real economic activity: The S&P 500 option implied risk aversion

Arbeitspapier

A new predictor of U.S. real economic activity: The S&P 500 option implied risk aversion

Option-Implied Risk-Neutral Distributions and Risk Aversion

Option-Implied Risk-Neutral Distributions and Risk Aversion

Option-implied term structures

Arbeitspapier

Option-implied term structures

Risk-adjusted option-implied moments

Arbeitspapier

Risk-adjusted option-implied moments

Option Implied Risk-Neutral Distributions and Implied Binomial Trees : a Literature Review

Option Implied Risk-Neutral Distributions and Implied Binomial Trees : a Literature Review

Option implied information for quantitative asset management

Hochschulschrift

Option implied information for quantitative asset management

Option implied information for quantitative asset management

Hochschulschrift

Option implied information for quantitative asset management

Updating the Option Implied Probability of Default Methodology

Arbeitspapier

Updating the Option Implied Probability of Default Methodology

Option-implied information and predictability of extreme returns

Arbeitspapier

Option-implied information and predictability of extreme returns

Option-implied information and predictability of extreme returns

Option-implied information and predictability of extreme returns

Updating the option implied probability of default methodology

Arbeitspapier

Updating the option implied probability of default methodology

Option-implied information and predictability of extreme returns

Option-implied information and predictability of extreme returns

Verbundene Objekte