CPVolSpread · Optionrisk · Bali and Hovakimian (2009)

Call minus Put Vol

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1996Q2 to 2022Q4.

Expected return · posterior mean, % per quarter

Next quarter

1.62%

95% interval 1.02% to 2.30%

Next year

1.60%

95% interval 0.93% to 2.30%

Next five years

1.54%

95% interval 0.61% to 2.35%

Next quarter

1.62%

95% interval 1.02% to 2.30%

Next year

1.60%

95% interval 0.93% to 2.31%

Next five years

1.54%

95% interval 0.62% to 2.35%

Next quarter

3.71%

95% interval 2.64% to 4.79%

Next year

3.54%

95% interval 2.55% to 4.53%

Next five years

3.05%

95% interval 1.65% to 4.31%

Next quarter

3.71%

95% interval 2.64% to 4.81%

Next year

3.55%

95% interval 2.54% to 4.56%

Next five years

3.10%

95% interval 1.68% to 4.31%

Cumulative market-adjusted return

+829% since 1996Q2 · log scale

Window	Mean	Vol.	Sharpe	t
1996Q2–2022Q4	8.71%	7.79%	1.12	5.78
2018Q1–2022Q4	6.02%	8.06%	0.75	1.67
2022Q1–2022Q4	9.18%	11.84%	0.78	0.78
1996Q2–2022Q4	8.71%	7.79%	1.12	5.78
2018Q1–2022Q4	6.02%	8.06%	0.75	1.67
2022Q1–2022Q4	9.18%	11.84%	0.78	0.78
1996Q2–2022Q4	16.95%	11.88%	1.43	7.38
2018Q1–2022Q4	14.21%	12.96%	1.10	2.45
2022Q1–2022Q4	30.33%	17.29%	1.75	1.75
1996Q2–2022Q4	16.95%	11.88%	1.43	7.38
2018Q1–2022Q4	14.21%	12.96%	1.10	2.45
2022Q1–2022Q4	30.33%	17.29%	1.75	1.75

Horizon	Mean	95% interval
Next quarter	0.418	0.262 – 0.589
Next year	0.412	0.238 – 0.593
Next five years	0.395	0.156 – 0.599
Next quarter	0.418	0.263 – 0.586
Next year	0.412	0.238 – 0.593
Next five years	0.395	0.157 – 0.604
Next quarter	0.628	0.442 – 0.822
Next year	0.598	0.427 – 0.773
Next five years	0.512	0.276 – 0.725
Next quarter	0.627	0.439 – 0.819
Next year	0.599	0.425 – 0.774
Next five years	0.519	0.282 – 0.724