{"title":"Anomalies, option volume, and disagreement","authors":"Allaudeen Hameed, Byounghyun (BH) Jeon","doi":"10.1111/fima.12466","DOIUrl":null,"url":null,"abstract":"<p>We document robust amplification of stock market anomaly returns associated with elevated option trading volume driven by disagreement trades. Consistent with the correction of mispricing associated with biased beliefs, anomaly returns are higher when disagreement option volume is high prior to earnings announcements. Additionally, we demonstrate that disagreement-based option volume is negatively related to future stock returns among stocks that are overpriced based on anomaly characteristics. Our findings also concentrate in stocks that are also difficult to short, emphasizing the combined impact of investor bias and shorting costs. Leveraging the staggered adoption of eXtensible Business Reporting Language, we establish a plausibly identified link between investor disagreement and short-horizon mispricing in stocks.</p>","PeriodicalId":48123,"journal":{"name":"Financial Management","volume":null,"pages":null},"PeriodicalIF":2.9000,"publicationDate":"2024-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Financial Management","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/fima.12466","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
We document robust amplification of stock market anomaly returns associated with elevated option trading volume driven by disagreement trades. Consistent with the correction of mispricing associated with biased beliefs, anomaly returns are higher when disagreement option volume is high prior to earnings announcements. Additionally, we demonstrate that disagreement-based option volume is negatively related to future stock returns among stocks that are overpriced based on anomaly characteristics. Our findings also concentrate in stocks that are also difficult to short, emphasizing the combined impact of investor bias and shorting costs. Leveraging the staggered adoption of eXtensible Business Reporting Language, we establish a plausibly identified link between investor disagreement and short-horizon mispricing in stocks.
期刊介绍：
Financial Management (FM) serves both academics and practitioners concerned with the financial management of nonfinancial businesses, financial institutions, and public or private not-for-profit organizations.
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