Fundamental analysis and option returns

Theodore Goodman, Monica Neamtiu, X. Frank Zhang

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


This article investigates whether fundamental volatility information is appropriately priced in the options market. We find that fundamental signals exhibit incremental predictive power with respect to future option returns above and beyond what is captured by implied and historical stock volatility, suggesting that the options market does not fully incorporate fundamental information into option prices. Transaction costs substantially reduce the overall profitability of hedge strategies that exploit only the fundamental volatility information in these accounting signals; however, fundamental signals provide a useful complement for strategies based on historical volatility.

Original languageEnglish (US)
Pages (from-to)72-97
Number of pages26
JournalJournal of Accounting, Auditing and Finance
Issue number1
StatePublished - Jan 2018


  • Accounting signals
  • Fundamental analysis
  • Fundamental volatility
  • Return

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)


Dive into the research topics of 'Fundamental analysis and option returns'. Together they form a unique fingerprint.

Cite this