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Optionable Stocks and Mutual Fund Performance

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  • Chune Young Chung
  • Doojin Ryu
  • Kainan Wang
  • Blerina Bela Zykaj

Abstract

We examine whether stock‐level options information drives mutual fund performance. Our paper is motivated by existing studies indicating that options prices or implied volatilities predict stock returns. We find that stock‐implied volatility innovations forecast mutual fund performance. Specifically, mutual funds investing in fewer optionable stocks or optionable stocks with favorable information outperform other funds. In addition, mutual fund managers overall do not trade on past options information. However, well‐performing fund managers use that information to decrease their holdings in poorly performing stocks. Moreover, well‐performing mutual funds containing strong options information tend to increase their holdings in optionable stocks in subsequent periods. © 2017 Wiley Periodicals, Inc. Jrl Fut Mark 38:390–412, 2018

Suggested Citation

  • Chune Young Chung & Doojin Ryu & Kainan Wang & Blerina Bela Zykaj, 2018. "Optionable Stocks and Mutual Fund Performance," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(3), pages 390-412, March.
    • Handle: RePEc:wly:jfutmk:v:38:y:2018:i:3:p:390-412
    DOI: 10.1002/fut.21844
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    Cited by:

    1. Doojin Ryu & Heejin Yang, 2018. "The directional information content of options volumes," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(12), pages 1533-1548, December.
    2. Pandow, Bilal, 2017. "Persistent Performance of Fund Managers: An analysis of selection and timing skills," MPRA Paper 82975, University Library of Munich, Germany.
    3. Jin Yuan & Xianghui Yuan, 2023. "A Comprehensive Method for Ranking Mutual Fund Performance," SAGE Open, , vol. 13(2), pages 21582440231, May.
    4. Collin Gilstrap & Alex Petkevich & Pavel Teterin & Kainan Wang, 2024. "Lever up! An analysis of options trading in leveraged ETFs," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(6), pages 986-1002, June.

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