Market moves and the information content of option prices
International Review of Economics and Finance , Volume 18 - Issue 2 p. 327- 340
In this paper we estimate risk-neutral returns distributions using the prices of options written on S&P 500 index futures and investigate whether or not specific characteristics of the returns distributions might be useful information for the purpose of predicting changes in market direction. The key distributional characteristics we focus on are skewness, kurtosis, and the probability weight in the extreme tails of the implied risk-neutral returns distributions. We find that, with one possible exception, the characteristics we considered are unlikely to improve a trader's ability to predict market moves.
|, , ,|
|International Review of Economics and Finance|
McIntyre, M, & Jackson, D. (2009). Market moves and the information content of option prices. International Review of Economics and Finance, 18(2), 327–340. doi:10.1016/j.iref.2008.01.006