Leveraging a call-put ratio as a trading signal

Patrick Houlihan, Germán G. Creamer

Research output: Contribution to journalArticlepeer-review

10 Scopus citations

Abstract

We examine whether a put-call ratio, derived from a unique set of market data, can be used to predict directional moves in asset prices during various market conditions between March 2005 and December 2012. Our findings show: (1) specific market participant's options trading volume is a predecessor to asset price movements, and (2) portfolios based on the put-call ratio adjusted for four factors Carhart model and transaction costs exhibit abnormal excess returns.

Original languageEnglish
Pages (from-to)763-777
Number of pages15
JournalQuantitative Finance
Volume19
Issue number5
DOIs
StatePublished - 4 May 2019

Keywords

  • Anomalies in prices
  • Behavioral finance
  • Financial forecasting
  • Investment management
  • Options
  • Portfolio management
  • Technical trading

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