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UQO Working Paper No. 7 — Options-implied information for cross-asset return and volatility prediction: evidence from 3.8B option contracts.
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1======================================================================2PORTFOLIO SORTS & ECONOMIC SIGNIFICANCE3======================================================================45 ATM IV (30d) → 1-Day Returns:6 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N7 Q1 3.17 7.98 12.97 0.615 2.382 37778 Q2 3.69 9.29 15.75 0.590 2.284 37779 Q3 4.50 11.34 18.10 0.627 2.426 377710 Q4 6.02 15.16 21.28 0.713 2.759 377711 Q5 8.67 21.85 29.73 0.735 2.846 377712 L/S(5-1) 5.51 13.88 25.55 0.543 2.103 37771314 ATM IV (30d) → 5-Day Returns:15 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N16 Q1 29.29 15.23 11.82 1.288 10.979 377717 Q2 27.47 14.28 15.05 0.949 8.090 377718 Q3 21.90 11.39 17.42 0.654 5.571 377719 Q4 17.87 9.29 20.85 0.446 3.799 377720 Q5 25.90 13.47 29.53 0.456 3.887 377721 L/S(5-1) -3.39 -1.76 26.13 -0.067 -0.575 37772223 Volatility Skew (25d) → 1-Day Returns:24 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N25 Q1 4.91 12.37 18.36 0.674 2.609 377826 Q2 4.35 10.97 17.22 0.637 2.467 377827 Q3 5.73 14.44 18.78 0.769 2.978 377828 Q4 5.89 14.84 20.42 0.727 2.813 377829 Q5 6.13 15.46 24.22 0.638 2.471 377830 L/S(5-1) 1.22 3.08 19.70 0.157 0.606 37783132 Volatility Skew (25d) → 5-Day Returns:33 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N34 Q1 62.40 32.45 17.74 1.829 15.593 377835 Q2 33.24 17.28 16.37 1.056 9.001 377836 Q3 22.98 11.95 18.06 0.662 5.640 377837 Q4 14.25 7.41 19.62 0.378 3.218 377838 Q5 -9.78 -5.08 23.98 -0.212 -1.807 377839 L/S(5-1) -72.18 -37.53 20.10 -1.868 -15.918 37784041 Implied Skewness → 1-Day Returns:42 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N43 Q1 7.67 19.33 24.36 0.794 3.072 377744 Q2 4.56 11.48 20.21 0.568 2.199 377745 Q3 4.92 12.41 18.49 0.671 2.598 377746 Q4 4.99 12.57 17.75 0.708 2.742 377747 Q5 4.37 11.00 16.84 0.653 2.530 377748 L/S(5-1) -3.31 -8.33 17.91 -0.465 -1.800 37774950 Implied Skewness → 5-Day Returns:51 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N52 Q1 42.45 22.08 24.22 0.912 7.769 377753 Q2 15.43 8.03 19.58 0.410 3.493 377754 Q3 18.44 9.59 17.64 0.544 4.634 377755 Q4 18.93 9.84 16.98 0.580 4.940 377756 Q5 23.39 12.16 15.88 0.766 6.527 377757 L/S(5-1) -19.06 -9.91 18.81 -0.527 -4.493 37775859 Implied Kurtosis → 1-Day Returns:60 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N61 Q1 7.90 19.91 24.26 0.821 3.177 377762 Q2 4.79 12.08 20.67 0.584 2.261 377763 Q3 4.16 10.49 18.77 0.559 2.164 377764 Q4 4.23 10.65 17.34 0.614 2.377 377765 Q5 4.79 12.06 15.65 0.771 2.984 377766 L/S(5-1) -3.11 -7.85 18.30 -0.429 -1.660 37776768 Implied Kurtosis → 5-Day Returns:69 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N70 Q1 -24.35 -12.66 23.88 -0.530 -4.519 377771 Q2 10.82 5.63 20.22 0.278 2.372 377772 Q3 30.12 15.66 17.93 0.874 7.444 377773 Q4 47.43 24.66 16.32 1.511 12.880 377774 Q5 60.33 31.37 15.15 2.071 17.651 377775 L/S(5-1) 84.68 44.04 18.91 2.328 19.843 37777677 Put-Call Volume Ratio → 1-Day Returns:78 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N79 Q1 2.99 7.53 18.09 0.416 1.662 402480 Q2 6.05 15.24 19.52 0.780 3.119 402481 Q3 6.22 15.68 19.74 0.794 3.174 402482 Q4 6.28 15.83 19.30 0.820 3.278 402483 Q5 5.46 13.76 18.53 0.743 2.968 402484 L/S(5-1) 2.47 6.24 12.04 0.518 2.070 40248586 Put-Call Volume Ratio → 5-Day Returns:87 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N88 Q1 58.19 30.26 17.47 1.732 15.234 402489 Q2 37.30 19.39 18.71 1.036 9.118 402490 Q3 26.60 13.83 19.32 0.716 6.300 402491 Q4 12.21 6.35 18.66 0.340 2.994 402492 Q5 -0.05 -0.03 17.68 -0.002 -0.014 402493 L/S(5-1) -58.25 -30.29 12.22 -2.478 -21.796 40249495 Put-Call OI Ratio → 1-Day Returns:96 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N97 Q1 4.72 11.88 18.65 0.637 2.546 402498 Q2 4.20 10.59 17.87 0.592 2.368 402499 Q3 4.53 11.43 19.01 0.601 2.402 4024100 Q4 6.72 16.93 19.64 0.862 3.445 4024101 Q5 6.75 17.01 20.12 0.846 3.379 4024102 L/S(5-1) 2.04 5.13 13.28 0.386 1.544 4024103104 Put-Call OI Ratio → 5-Day Returns:105 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N106 Q1 24.26 12.61 18.30 0.689 6.062 4024107 Q2 18.55 9.64 17.37 0.555 4.884 4024108 Q3 25.65 13.34 17.53 0.761 6.693 4024109 Q4 31.82 16.55 19.01 0.870 7.655 4024110 Q5 34.38 17.88 19.44 0.919 8.089 4024111 L/S(5-1) 10.13 5.27 13.27 0.397 3.492 4024112113 IV Term Structure Slope → 1-Day Returns:114 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N115 Q1 7.72 19.46 25.81 0.754 2.457 2676116 Q2 1.85 4.67 19.88 0.235 0.765 2676117 Q3 2.47 6.23 18.81 0.331 1.079 2676118 Q4 4.16 10.48 18.14 0.578 1.883 2676119 Q5 5.81 14.63 20.14 0.726 2.367 2676120 L/S(5-1) -1.92 -4.83 20.46 -0.236 -0.769 2676121122 IV Term Structure Slope → 5-Day Returns:123 Q Mean(bps) Ann.Ret% Ann.Vol% Sharpe t-stat N124 Q1 20.45 10.63 25.99 0.409 2.935 2676125 Q2 9.71 5.05 20.02 0.252 1.810 2676126 Q3 24.57 12.78 18.55 0.689 4.941 2676127 Q4 34.51 17.94 17.72 1.013 7.265 2676128 Q5 42.23 21.96 19.52 1.125 8.070 2676129 L/S(5-1) 21.79 11.33 20.30 0.558 4.004 2676130131======================================================================132LONG-SHORT PORTFOLIO SUMMARY (Q5 - Q1)133======================================================================134 sort_variable return_horizon mean_daily_bps annualized_return_pct sharpe_ratio t_statistic135 ATM IV (30d) 1-Day 5.507 13.878 0.543 2.103136 ATM IV (30d) 5-Day -3.391 -1.763 -0.067 -0.575137 Volatility Skew (25d) 1-Day 1.223 3.083 0.157 0.606138 Volatility Skew (25d) 5-Day -72.178 -37.533 -1.868 -15.918139 Implied Skewness 1-Day -3.305 -8.329 -0.465 -1.800140 Implied Skewness 5-Day -19.064 -9.913 -0.527 -4.493141 Implied Kurtosis 1-Day -3.114 -7.847 -0.429 -1.660142 Implied Kurtosis 5-Day 84.684 44.036 2.328 19.843143 Put-Call Volume Ratio 1-Day 2.474 6.236 0.518 2.070144 Put-Call Volume Ratio 5-Day -58.247 -30.289 -2.478 -21.796145 Put-Call OI Ratio 1-Day 2.036 5.131 0.386 1.544146 Put-Call OI Ratio 5-Day 10.126 5.266 0.397 3.492147IV Term Structure Slope 1-Day -1.915 -4.826 -0.236 -0.769148IV Term Structure Slope 5-Day 21.786 11.329 0.558 4.004149150======================================================================151DOUBLE SORT: IV_ATM x IMPLIED_SKEWNESS → 5-Day Returns152======================================================================153 Low Skew Med Skew High Skew154Low IV 8.15 24.12 35.90155Med IV 22.11 23.80 15.62156High IV 41.76 2.72 -47.82157158t-statistics:159 Low Skew Med Skew High Skew160Low IV 2.037 11.080 24.972161Med IV 6.477 10.148 5.830162High IV 13.121 0.649 -6.171163164======================================================================165TRANSACTION COST SENSITIVITY (Long-Short on Implied Skewness, 5D)166======================================================================167 TC (bps) Net Ret(bps) Ann.Ret% Sharpe168 0 -19.06 -9.91 -0.527169 5 -21.06 -10.95 -0.582170 10 -23.06 -11.99 -0.638171 15 -25.06 -13.03 -0.693172 20 -27.06 -14.07 -0.748173 30 -31.06 -16.15 -0.859174 50 -39.06 -20.31 -1.080175176PORTFOLIO SORTS COMPLETE.177