Principal component analysis of equity options on Dow-Jones firms reveals a strong factor structure. The first principal component explains 77% of the variation in the equity volatility level, 77% of the variation in the equity option skew, and 60% of the implied volatility term structure across...

Over-the-counter (OTC) stocks are far less liquid, disclose less information, and exhibit lower institutional holdings than listed stocks. We exploit these different market conditions to test theories of cross-sectional return premiums. Compared to premiums in listed markets, the OTC illiquidity...

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...

Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews, and term structures explain a substantial fraction of the cross-sectional variation. Furthermore, these principal components are highly correlated with the S&P500 index option...

We develop a tractable dynamic model of an index option market maker with limited capital and characterize how option prices depend on inventory risk and market maker wealth. The risk averse market maker absorbs positive demand by end users and requires a more negative variance risk premium when...

Over-the-counter (OTC) stocks are far less liquid, disclose less information, and exhibit lower institutional holdings than listed stocks. We exploit these different market conditions to test theories of cross-sectional return premiums. Compared to premiums in listed markets, the OTC illiquidity...

Over-the-counter (OTC) stocks are far less liquid, disclose less information, and exhibit lower institutional holdings than listed stocks. We exploit these different market conditions to test theories of cross-sectional return premiums. Compared to premiums in listed markets, the OTC illiquidity...

We propose a novel factor model for option returns. Option exposures are estimated nonparametrically and factor risk premia can vary nonlinearly with states. The model is estimated using regressions, with minimal assumptions on factor and option return dynamics. Using index options, we...

Using filtering techniques, spectral analysis, and Markov chain models, I document trends and cycles of factors have significantly changed over the period to December 2000 compared to the period post-January 2001. The recent weaker performance of value in the 21st century, including the value...

We examine the factor exposures of several popular market capitalization indexes and how they vary over time. We find that most market capitalization weight indexes are effectively exposed to only two or three factors, with value and momentum being increasingly dominant. We find that the...