Research and publications

Improving Portfolio Selection Using Option-Implied Volatility and Skewness

The objective of this paper is to examine whether one can use option-implied information to improve the selection of portfolios with a large number of stocks, and to document which aspects of option-implied information are most useful for improving their out-of-sample performance. Portfolio performance is measured in terms of four metrics: volatility, Sharpe ratio, certainty-equivalent return and turnover. A revisited version of this paper was published in the December 2013 issue of the Journal of Financial and Quantitative Analysis.

Author(s) :

Victor DeMiguel, Yuliya Plyakha, Raman Uppal, Grigory Vilkov

Summary :

The objective of this paper is to examine whether one can use option-implied information to improve the selection of portfolios with a large number of stocks, and to document which aspects of option-implied information are most useful for improving their out-of-sample performance. Portfolio performance is measured in terms of four metrics: volatility, Sharpe ratio, certainty-equivalent return and turnover. A revisited version of this paper was published in the December 2013 issue of the Journal of Financial and Quantitative Analysis.

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Type : Working paper
Date : 01/03/2011
Keywords :

Performance