Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2015. The project is a required component of every master program.
Authors:
Juan Imbet, Nuria Mata
Master’s Program:
Finance
Paper Abstract:
We test if the first four moments of the risk neutral distribution implicit in options’ prices predict market returns. We estimate the risk
neutral distribution of the S&P 500 over different frequencies using a non parametric polynomial fitting, and test if the first four moments of the distribution predict returns of the S&P 500. Our results suggest that there is no evidence on this predictability power.
Presentation Slides:
[slideshare id=50497458&doc=risk-neutral-future-returns-150714070303-lva1-app6891]