The Puzzle of Index Option Returns

  title={The Puzzle of Index Option Returns},
  author={George M. Constantinides and NBER Jens Carsten Jackwerth},
We construct a panel of S&P 500 Index call and put option portfolios, daily adjusted to maintain targetedmaturity,moneyness, andunitmarket beta, and testmulti factor pricing models. The standard linear factor methodology is applicable because the monthly port folio returns have low skewness and are close to normal. We hypothesize that any one of crisis related factors incorporating price jumps, volatility jumps, and liquidity (along with themarket) explains the cross sectional variation in… CONTINUE READING
Highly Cited
This paper has 20 citations. REVIEW CITATIONS