NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Nusret Cakici

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

Working Papers

October 2013The Joint Cross Section of Stocks and Options
with Byeong-Je An, Andrew Ang, Turan G. Bali: w19590
Stocks with large increases in call implied volatilities over the previous month tend to have high future returns while stocks with large increases in put implied volatilities over the previous month tend to have low future returns. Sorting stocks ranked into decile portfolios by past call implied volatilities produces spreads in average returns of approximately 1% per month, and the return differences persist up to six months. The cross section of stock returns also predicts option-implied volatilities, with stocks with high past returns tending to have call and put option contracts which exhibit increases in implied volatility over the next month, but with decreasing realized volatility. These predictability patterns are consistent with rational models of informed trading.
September 2013Hybrid Tail Risk and Expected Stock Returns: When Does the Tail Wag the Dog?
with Turan G. Bali, Robert F. Whitelaw: w19460
We introduce a new, hybrid measure of stock return tail covariance risk, motivated by the under-diversified portfolio holdings of individual investors, and investigate its cross-sectional predictive power. Our key innovation is that this covariance is measured across the left tail states of the individual stock return distribution, not across those of the market return as in standard systematic risk measures. We document a positive and significant relation between hybrid tail covariance risk (H-TCR) and expected stock returns, with an annualized premium of 9%, in contrast to the insignificant or negative results for purely stock-specific or systematic tail risk measures.
March 2009Maxing Out: Stocks as Lotteries and the Cross-Section of Expected Returns
with Turan G. Bali, Robert F. Whitelaw: w14804
Motivated by existing evidence of a preference among investors for assets with lottery-like payoffs and that many investors are poorly diversified, we investigate the significance of extreme positive returns in the cross-sectional pricing of stocks. Portfolio-level analyses and firm-level cross-sectional regressions indicate a negative and significant relation between the maximum daily return over the past one month (MAX) and expected stock returns. Average raw and risk-adjusted return differences between stocks in the lowest and highest MAX deciles exceed 1% per month. These results are robust to controls for size, book-to-market, momentum, short-term reversals, liquidity, and skewness. Of particular interest, including MAX reverses the puzzling negative relation between returns and idios...

Published: Journal of Financial Economics Volume 99, Issue 2, February 2011, Pages 427–446 Cover image Maxing out: Stocks as lotteries and the cross-section of expected returns ☆ Turan G. Balia, 1, E-mail the corresponding author, Nusret Cakicib, 2, E-mail the corresponding author, Robert F. Whitelawc, d,

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us