6533b85ffe1ef96bd12c0f08
RESEARCH PRODUCT
Option-Implied Volatility-Managed Asset Pricing Risk Factors and Resurrection of the Value Factor
Klaus GrobysKlaus Grobyssubject
Multivariate statisticsMomentum (finance)Market riskSharpe ratioValue (economics)EconometricsEconomicsCapital asset pricing modelRisk factor (finance)Implied volatilityhealth care economics and organizationsdescription
Option-implied volatility-managed risk factor models produce higher maximum squared Sharpe ratios than the recently proposed six-factor model, which is used as a benchmark model in this study. A model that incorporates option-implied volatility-managed risk factors based on dynamic scaling factors that systematically overestimate the expected market risk, as measured by the VIX, is superior to other asset pricing model specifications. After the death of the value factor has been repeatedly declared, it is surprising news that multivariate spanning regressions reveal that both the option-implied volatility-managed momentum and value factor are the only option-implied volatility-managed risk factors that generate alpha and that are therefore the cause of the asset pricing model’s superiority.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2019-01-01 | SSRN Electronic Journal |