Download or read book Option Mispricing Around Nontrading Periods written by Christopher S. Jones and published by . This book was released on 2017 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt: We find that option returns are significantly lower over nontrading periods, the vast majority of which are weekends. Our evidence suggests that nontrading returns cannot be explained by risk, but are rather the result of widespread and highly persistent option mispricing driven by the incorrect treatment of non-smoothness in stock return variance. The size of the effect implies that the broad spectrum of finance research involving option prices should account for nontrading effects and non-smoothness in variance more generally. Our study further suggests how alternative industry practices could improve the efficiency of option markets in a meaningful way.