Do investors follow the herd in option markets?

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

5 Scopus Citations
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Author(s)

  • Alejandro Bernales
  • Thanos Verousis
  • Nikolaos Voukelatos

Related Research Unit(s)

Detail(s)

Original languageEnglish
Article number104899
Journal / PublicationJournal of Banking and Finance
Volume119
Online published9 Feb 2016
Publication statusPublished - Oct 2020

Abstract

We investigate the previously unexplored herding behaviour of investors in option markets, by examining equity option contracts traded in the US between 1996 and 2012. We document strong herding effects in option trading activity that are conditional on a set of systematic factors related to periods of market stress. More specifically, we find that option investors tend to herd during periods of high market volatility risk, on dates of macroeconomic announcements, during the financial crisis of 2008, when a large number of market option positions is either opened or closed, and during periods of a large average dispersion of analysts' forecasts.

Research Area(s)

  • Cross-sectional dispersion, Herding, Options

Citation Format(s)

Do investors follow the herd in option markets? / Bernales, Alejandro; Verousis, Thanos; Voukelatos, Nikolaos.

In: Journal of Banking and Finance, Vol. 119, 104899, 10.2020.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review