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Research Seminars

Virtual seminar: Jian Hua - Baruch College, City University of New York

Wednesday, 20 October 2021
14:00 to 15:20
Jian Hua
Virtual event

Topic: Hedge Fund Option Skills

As part of the External Economics and Finance Seminar Series.

Abstract:

We provide new insights on how hedge funds use options and short selling channels to trade on their negative information. Both bearish hedge fund option positions and high short interest predict economically-large abnormal returns of similar magnitude. The information in hedge fund option positions is distinct from information in short interest, but it is the combination of option positions and short interest that provide the strongest information signal. A portfolio of stocks with high short interest and bearish hedge fund options positions predicts negative abnormal returns that are more than four times as large as the portfolio with high short interest and bullish options positions. The information in hedge fund option positions increases during periods of market stress, while that in short interest does not. This increase is concentrated in capital-constrained hedge funds, suggesting that options provide a channel for capital constrained hedge funds to exploit their information advantage.

Click here to join the event.

Virtual seminar: Jian Hua - Baruch College, City University of New York

Wednesday, 20 October 2021
14:00 to 15:20
Jian Hua
Virtual event

Topic: Hedge Fund Option Skills

As part of the External Economics and Finance Seminar Series.

Abstract:

We provide new insights on how hedge funds use options and short selling channels to trade on their negative information. Both bearish hedge fund option positions and high short interest predict economically-large abnormal returns of similar magnitude. The information in hedge fund option positions is distinct from information in short interest, but it is the combination of option positions and short interest that provide the strongest information signal. A portfolio of stocks with high short interest and bearish hedge fund options positions predicts negative abnormal returns that are more than four times as large as the portfolio with high short interest and bullish options positions. The information in hedge fund option positions increases during periods of market stress, while that in short interest does not. This increase is concentrated in capital-constrained hedge funds, suggesting that options provide a channel for capital constrained hedge funds to exploit their information advantage.

Click here to join the event.