Momentum Strategies on Optioned and Non-Optioned Stocks
Journal of American Academy of Business, 2008
Posted: 29 Dec 2008 Last revised: 11 Jan 2011
Date Written: March 28, 2008
Abstract
As implied by Mayhew and Mihov (2004), an ideal control sample of non-optioned stocks used in comparing or contrasting to optioned stocks must consider the liquidity and the volatility of these stocks. Following this and the study by Chan, Jegadeesh, and Lakonishok (1996), we study price and earnings momentum strategies on both optioned stocks and selected non-optioned stocks over 1983 to 2002. The purpose is to examine whether information issued by or related to non-optioned stocks have more information contents than similar information regarding optioned stocks. We find that both price and earnings momentum strategies can be applied more successfully in the sample of non-optioned stocks than in the sample of optioned stocks. This better performance in the sample of non-optioned stocks is associated with the wider spread of earnings estimate revisions between the winning portfolio and the losing portfolio, an indication of a richer information content regarding the sample of non-optioned stocks than that of the sample of optioned stocks.
Keywords: Options, Trading Strategies
JEL Classification: G11
Suggested Citation: Suggested Citation
Kishore Tandon
CUNY Baruch College - Zicklin School of Business ( email )
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