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Option-Implied Skewness and the Value of Financial Intermediaries

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  • Silvia Bressan

    (Free University of Bozen-Bolzano)

  • Alex Weissensteiner

    (Free University of Bozen-Bolzano)

Abstract

In this paper, we analyze the relationship among skewness, value, and stock returns for US financial intermediaries. Further, we compare skewness based on past returns to risk-neutral skewness based on options. We find that the option-implied skewness has a significantly higher explanatory power. In line with the strand of literature on investors exploiting mispriced stocks through option trading, we find that a higher ex ante skewness indicates a low valuation that predicts higher returns. We investigate the relationship between skewness and value for each segment of intermediaries, and we show that the link is strongest for financial technology firms.

Suggested Citation

  • Silvia Bressan & Alex Weissensteiner, 2023. "Option-Implied Skewness and the Value of Financial Intermediaries," Journal of Financial Services Research, Springer;Western Finance Association, vol. 64(2), pages 207-229, October.
    • Handle: RePEc:kap:jfsres:v:64:y:2023:i:2:d:10.1007_s10693-022-00387-y
    DOI: 10.1007/s10693-022-00387-y
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    More about this item

    Keywords

    Financial intermediaries; Corporate value; Stock returns; Option-implied skewness;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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