I am grateful for helpful comments from Chuang-Chang Chang, San-Lin Chung, Ming Guo, and the seminar participants at National Central University, National Chi Nan University, Providence University, the 2012 KFA & TFA Joint Conference in Finance, and the 2012 International Conference on Futures and Derivative Markets. I thank the National Science Council of Taiwan (project no. NSC 101-2410-H-002-001) and National Taiwan University (project no. 101R7743) for the financial support provided for this study.
Volatility Information in the Trading Activity of Stocks, Options, and Volatility Options
Article first published online: 4 MAR 2013
© 2013 Wiley Periodicals, Inc.
Journal of Futures Markets
Special Issue: Special Issue from the International Conference on Futures and Other Derivative Markets
Volume 33, Issue 8, pages 752–773, August 2013
How to Cite
Wang, Y.-H. (2013), Volatility Information in the Trading Activity of Stocks, Options, and Volatility Options. J. Fut. Mark., 33: 752–773. doi: 10.1002/fut.21601
- Issue published online: 22 MAY 2013
- Article first published online: 4 MAR 2013
- Manuscript Accepted: 1 JAN 2013
- Manuscript Received: 5 SEP 2012
We investigate the information content of trading activity in S&P 500 component stocks, S&P 500 index options and VIX options on the future realized volatility (RV) of S&P 500 index returns and find that the only consistently useful information on the determination of future RV is provided by trading activity in VIX calls. We also find a discernible increase in the level of predictability when investors are more worried, when the level of information asymmetry in the VIX call market is higher, and when the transaction costs of VIX calls are lower, relative to S&P 500 index options.