| An option is a contract that gives the purchaser the right to buy or sell a certain amount of an asset within a specified period at a specified price.With the rapid development of Chinese financial market,it is necessary to use options to manage risks.Because of the flexible contract design and high leverage,the option market has more forward-looking information.Among them,the implied volatility and higher moments reflect the volatility,asymmetry,peak and thick tail characteristics of asset returns,which could capture the stock market’s uncertainty risk and tail risk.Based on Shanghai Stock Exchange 50 ETF options(SSE 50 ETF options),this thesis studies the information capacity of implied volatility asymmetry(IVA)and higher moment risks and analyzes their predictability on stock returns.Based on the TM model,this thesis also studies fund managers’ timing ability on implied volatility asymmetry,higher moment risks and their risk premiums.Specifically,the main contents and contributions of the thesis are as follows:Firstly,this thesis constructs the implied volatility asymmetry using the relative difference of “good” and “bad” volatilities and studies its predictability on stock returns.Based on the HAR-RV-IV-IVA model,this dissertation also examines the effect of implied volatility asymmetry on volatility.The empirical results indicate that,in short term,IVA is negatively related to stock return,while in the long term,IVA has a positive relationship with the stock return.The predictive power of IVA is stronger than that of the realized volatility asymmetry.Besides,the IVA trends with different term structures are similar,and the longer the maturity,the more volatile of IVA.In addition,the predictive power of IVA will increase during the information gathering stage and abnormal sentiment periods.The absolute value of implied volatility asymmetry could positively predict the volatility of future returns.Secondly,this thesis studies the information capacity of higher moment risks and their predictability.Implied higher moments reflect investors’ expectations on the future tail risk of the stock market and are an important supplement to implied volatility.This thesis uses ARMA model to estimate the implied higher moments’ innovations,defines them as the implied higher moment risks,and researches their predictive ability on stock returns.The empirical results indicate that the implied skewness innovation and implied kurtosis innovation are negatively related to future stock returns,especially for implied skewness innovation,when controlling for PE,dividend yield,etc.From the crosssectional perspective,stocks with higher exposure to innovations in implied skewness exhibit lower excess returns,which indicates that risk-averse investors will demand more risk compensation in order to avoid the tail risk.Thirdly,this thesis studies the information capacity of higher moment risk premiums and their predictability.The higher moment risk premiums reflect the risk compensations that investors needed.This research estimates higher-moment risk premiums using the difference between the realized and the risk-neutral measurements,and explore their effect on stock returns.The empirical results indicate that higher moment risk premiums exist in China,the mean value of skewness risk premium is positive,and the mean value of kurtosis risk premium is negative.Skewness risk premium has a significantly positive predictive effect on stock returns,which is consistent with the theoretical analysis that skewness risk premium contains market downside risk.What’s more,investor sentiment could also affect skewness risk premium predictive power.Whereas,the kurtosis risk premium shows no significant predictive power.Finally,this thesis studies the timing ability of Chinese open-end fund managers on the implied volatility asymmetry,higher moment risks and their risk premiums.Timing ability is defined as a fund manager’s ability to anticipate market changes and adjust the fund’s market exposure in line with expectations.In this research,the TM timing model is used to analyze fund managers’ timing ability.The empirical results indicate that fund managers have a positive implied volatility asymmetry timing,but this timing could not bring significant returns to investors.Then,the finding shows that fund managers have negative implied tail risk timing ability,namely,managers tend to decrease the market exposure when the market-implied tail risk increases.The top timer outperforms the bottom timer by approximately 2.77%–3.53% annually on excess returns with 30‐day holding periods.Finally,for higher-moment risk premiums,the managers have negative skewness risk premium timing ability and positive kurtosis risk premium timing ability.However,the kurtosis risk premium timing brings nonsignificant economic value to investors.This study contributes to prior literature in the following aspects.(1)Considering the dividend protection mechanism of SSE 50 ETF options,this thesis employs a model-free method to estimate implied volatility asymmetry and implied higher-moment risks.Compared with the mature option market,the SSE50 ETF option has its own characteristics in terms of pricing efficiency,investor composition and market microstructure.As a result,the existing implied risk estimation methods are not suitable for the Chinese market.Therefore,this thesis considers the underlying assets’ dividend and sell short limit,and uses a model-free method to estimate implied volatility asymmetry and implied higher-moment risks,which has certain significance to promote the risk research of Chinese option market.(2)This thesis distinguishes the "good" and "bad" implied volatilities,and provides a new empirical evidence for the relationship between implied volatility asymmetry,higher moment risks and stock returns.At present,the volatility and higher moment risks in the Chinese market are mainly extracted from stock market.Considering the option market has forward-looking information,this research extracts their information using option data.Moreover,existing studies have not reached a consistent conclusion on the relationship between volatility and higher moment risks and stock returns.This study provides new empirical evidences for the relevant studies.(3)The existence of higher moment risk premiums in the Chinese market and their risk information are discussed.The higher moments under realized and risk neutral measurements contain different information,which reflects the risk compensation for bearing higher-moment risk.Since the options market in China’s mainland started late,there are few studies on higher moment risk premium.This study has enriched relevant research findings.(4)Researching the fund managers’ implied tail risk timing ability.At present,the timing literatures mainly focus on the market timing,volatility timing,liquidity timing,investor sentiment timing,and so on.Few studies care about the option implied information,especially about implied tail risk.This study employs the TM model and explores whether Chinese fund managers focus on implied tail risks,enriching the existing literatures and has significant guidance for the subsequent decision-making. |
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