Abstract
In this paper, we examine whether the risk neutral skewness and kurtosis from S&P 500 options have information for predicting the higher moments of the stock returns called skewness and kurtosis, which contain the important information for forecasting potential crash, spike upward and the fluctuations of stock index. We find that the implied risk neutral skewness and kurtosis does not provide the information contents for predicting the higher moments of S&P 500 index return, after eliminating the overlapping data. All the results are robust to the alternative measures of risk neutral moments from options prices, the sub-periods and forecasting periods.
Keywords
Citation
Kim, S. (2016), "On the Usefulness of Risk-Neutral Skewness and Kurtosis for Forecasting the Higher Moments of Stock Returns", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 24 No. 2, pp. 185-220. https://doi.org/10.1108/JDQS-02-2016-B0001
Publisher
:Emerald Publishing Limited
Copyright © 2016 Emerald Publishing Limited
License
This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode