Leveraging a Call-Put Ratio as a Trading Signal

The Version of Record of this manuscript has been published and is available in Quantitative Finance (2019), 19 (5): 763-777.

Howe School Research Paper No. 2015-49

36 Pages Posted: 27 Nov 2014 Last revised: 15 Sep 2019

See all articles by Patrick Houlihan

Patrick Houlihan

Stevens Institute of Technology

Germán G. Creamer

Stevens Institute of Technology, School of Business; Columbia University - Department of Computer Science

Date Written: 2018

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.

Keywords: Anomalies in Prices; Portfolio Management; Technical Trading; Financial Forecasting; Investment Management; Options; Behavioral Finance

JEL Classification: C15, C49, C63

Suggested Citation

Houlihan, Patrick and Creamer, Germán G., Leveraging a Call-Put Ratio as a Trading Signal (2018). The Version of Record of this manuscript has been published and is available in Quantitative Finance (2019), 19 (5): 763-777. , Howe School Research Paper No. 2015-49, Available at SSRN: https://ssrn.com/abstract=2363475 or http://dx.doi.org/10.2139/ssrn.2363475

Patrick Houlihan (Contact Author)

Stevens Institute of Technology ( email )

Hoboken, NJ 07030
United States

Germán G. Creamer

Stevens Institute of Technology, School of Business ( email )

1 Castle Point on Hudson
Hoboken, NJ 07030
United States
2012168986 (Phone)

HOME PAGE: http://www.creamer-co.com

Columbia University - Department of Computer Science ( email )

New York, NY 10027
United States

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