Presenter: Sebastian Bak Egebjerg, AU

Title: High-Frequency Option Predictability 

Abstract: We study the high-frequency predictability of S&P 500 index option returns using trade and quote data combined with machine learning methods. Our models achieve substantial out-of-sample predictive power, with median R^2 around 20% and directional accuracy above 53% across our sample period. Predictability is concentrated in out-of-the-money and less liquid options, is stronger toward the end of the trading day, and quickly disappears beyond a few minutes. The most important predictors include short-term past returns and implied volatility, alongside microstructure variables such as bid-ask spreads and order-flow imbalances. Incorporating information from other parts of the option surface does not meaningfully improve forecasts, and retail trading activity is associated with reduced predictability. Overall, the results document consistent short-term predictability in SPX options, driven by market microstructure rather than systematic mispricing, and unlikely to yield exploitable trading strategies.

Presenter: Marcus Piil Pedersen, KU

Title: Momentum has momentum?

Abstract: Momentum investing has historically delivered high Sharpe ratios and positive alphas across asset classes, though it is occasionally plagued by prolonged periods of negative performance. Investigating the persistency of these periods, I find: (1) Momentum has momentum; the alpha of momentum strategies is increasing in short-term past momentum performance in equity markets across 4 geographies. (2) The Winners (Losers) generate negative (positive) alpha when short-term past performance is in its bottom 10-20\% percentile. (3) I introduce a simple flipping strategy, shorting the momentum strategy when past performance is low. This strategy generate up to 3x the sharpe ratio of the classical momentum strategy and is able to generate alpha even when considering the classical momentum as a factor. Lastly, I explore possible explanation for this phenomenon and introduce a model recreating it. 

PhD presentation as part of mandatory 1st or 3rd year presentation. The time is extended to one hour; the presenter has 40 minutes for the presentation, 5-10 minutes for the discussant, and 5-10 minutes for questions.

Organizers: Stefan Hirth and Anders Merrild Posselt