The distribution of stock returns implied in their options at the turn-of-the year: a test of seasonal volatility

Article Abstract:

Seasonal or the turn-of-the-year anomaly is observed in the large rate of return on stocks starting on the last trading day in December until the end of January where more than 50% of the return transpire during the first five days of trading. Research conducted on stock returns and their relation to increases in year-end volatilities indicate that volatility increases result from price pressure occurring from portfolio rebalancing at the end of the year. Evidence suggests that the survival of stock return seasonal is dependent on transaction costs.

Research, Return on investment, Corporate distributions, Rate of return

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The real thing: a dynamic profile of the term structure of real interest rates and inflation expectations in the United Kingdom, 1982-89

Article Abstract:

Real interest rates and inflation expectations in the UK were estimated without making assumptions about how the expectations were developed. The sample consisted of the prices of UK index-linked and conventional gilt-edged bonds between March 1982 and 1989. The results indicated that real interest rates were not constant, real interest rates were higher than expected, inflation risk premiums had a tendency to be small, and market data on real interest rates and inflation expectations could be used to calculate believable estimates.

United Kingdom, Measurement, Inflation (Finance), Financial markets, Inflation (Economics), Great Britain

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Implied interest rates

Article Abstract:

The new risk-free instrument on the market, put and call options, are examined. The interest rates that are implied in the option prices are estimated and compared to other riskless rates. It is found that the implied rates in option prices are similar to the effective borrowing rate, demonstrating that put and call options are competitive with existing riskless investments such as the Treasury-bill rate and the brokers' loan-call rate.

Analysis, Options (Finance)

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