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THE VALUE LINE STOCK RANKINGS AND THE OPTION MODEL IMPLIED STANDARD DEVIATIONS
Author(s) -
Tezel Ahmet
Publication year - 1988
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1988.tb00083.x
Subject(s) - predictability , volatility (finance) , implied volatility , economics , econometrics , financial economics , earnings , residual , index (typography) , standard deviation , actuarial science , statistics , mathematics , accounting , computer science , algorithm , world wide web
Here, the relationship between Value Line rankings and option implied standard deviations is investigated. Each Value Line ranking (safety, price stability, timeliness, and earnings predictability) is significantly related to option implied standard deviations for a sample of 62 companies with Value Line timeliness rankings of 1, 2, 4, and 5 and with a total of 1,217 call options traded over a 3‐day period. The index for price stability would be most valuable to investors for assessing future risk since only this index has a significant association with residual implied volatility, i.e., those unexplained by historical volatility.