The Contribution of Frictions to Expected Returns
10:30Seminar Room, IPAG Research Department, 188 Rue de Rivoli, 75001 Paris
IPAG Research Department
We derive a model-free formula to estimate the contribution of market frictions to expected returns (CFER) within a formal asset pricing setting. We document that CFER can be estimated accurately by properly scaled deviations from put-call parity. CFER is sizable, it predicts stock returns and it has superior properties than previously proposed measures of deviations from put-call parity. We find that its predictive power stems from capturing the effect of market frictions, rather than from omitted factors and informed trading. Our findings suggest that market frictions, especially transaction costs, have a sizable effect even on large optionable stocks.
George Skiadopoulos is a Professor of Finance at the Department of Banking and Financial Management of the University of Piraeus and at the School of Economics and Finance of Queen Mary University of London. He is also the co-Founder and Director of the Institute of Finance and Financial Regulation (IFFR), and an Associate Research Fellow at Cass Business School.
His research interests and professional expertise lie in the fields of asset pricing, commodities, financial derivatives, risk management and portfolio management. He has published in leading academic journals such as the Management Science, Journal of Financial and Quantitative Analysis, Journal of Business and Economic Statistics, Journal of Financial Markets, and the Journal of Banking and Finance.
He is a speaker in international conferences and seminars for academics and practitioners, and he provides executive training courses. He has acted as a consultant to a number of financial institutions. He has also worked as a Research Fellow at the Financial Options Research Centre at Warwick Business School, and at the R&D Group of the Athens Derivatives Exchange.
Professor Skiadopoulos serves in the editorial boards of the Journal of Banking and Finance, Journal of Business Finance and Accounting, Journal of Commodity Markets, Journal of Derivatives and Multinational Finance Journal. He has also served in the Academic Advisory Board of the Professional Risk Managers International Association (PRMIA).
He has been awarded research grants by institutions such as the Chicago Mercantile Exchange, the J.P. Morgan Research Centre in Commodities at University of Denver Colorado, the Athens Derivatives Exchange, and the Portuguese State. His work has been featured in CFA, Citigroup, and Global Commodities Applied Research Digest Volumes, Economonitor, CFO Magazine, Forbes, Market Watch, Seeking Alpha, The Verdict, and the Wall Street Journal.
Professor Skiadopoulos holds a Ph.D. in Finance from the University of Warwick, an M.Sc. in Mathematical Economics and Econometrics from the London School of Economics, and a Ptychion (ranked first in his graduating class) in Economics from the Athens University of Economics and Business.