Hojoon Lee - Research

Working Papers

The Information in Option Strike Price Introductions [SSRN]

Abstract: I examine the information content of option strike price introductions. I find that stocks with options introduced above the prevailing maximum strike price outperform those with options introduced below the prevailing minimum strike price by up to 6% over the following 12 months. While this result is neither explained by stock-price momentum nor a variety of other documented stock and option variables, it is stronger for stocks with high informed trading intensity and high option-to-stock volume ratio, consistent with informed traders disguising their trades in high volume. The results are consistent with informed investors that have private information driving the introduction of new strike prices to enable cost-effective leverage.
Presentations: Florida State University, Nanyang Technological University in Singapore, Texas Christian University, University of Cincinnati, Boston College Brown Bag, Boston College Eagle Finance Conference 2024

Narrative Momentum (with Xiaoxia Lou, Gideon Ozik, and Ronnie Sadka) [SSRN]

Abstract: This paper advances that investors underreact to economic narratives. Using real-time-collected articles from thousands of digital sources for over a decade, coverage intensities of roughly 350 narratives are quantified, and corresponding narrative-mimicking, long-short portfolios are constructed using stock narrative betas. Narrative-mimicking portfolios of recently rising narrative intensities outperform those of declining intensities by about 8% annually, controlling for standard risk factors. Neither stock nor factor price momentum explains narrative momentum, which is stronger for slowly trending narratives. Furthermore, analysts tend to underreact to narrative-sensitive stocks. Additional results highlight the importance of considering the discourse among sources beyond traditional, general media.
- Presentations: AFA 2025, NBER Summer Institute 2024: Big Data and High-Performance Computing for Financial Economics (*), Citi Quant Conference 2025 (*), Society of Quantitative Analysts Conference 2024 (*), 8th Annual Global Quantitative and Macro Investment Conference, 15th Annual Hedge Fund Research Conference, 4th Frontiers of Factor Investing 2024, INQUIRE Autumn Residential 2023 (*), Chicago Quantitative Alliance conference Spring 2023 (*), FOME Forum (Nice) (*), State Street Research Retreat 2023 (*)
- Awards: INQUIRE Autumn Residential 2023 Best Paper Award, IQAM Research Award 2024 1st Prize, PanAgora Crowell Prize 2024 Finalist

(*): Presented by co-authors

Market Cycle Momentum in Anomalies

Abstract: Factors that performed well in the past bear market tend to perform well in the current one. Using ex-ante information to define market cycles, I find that market cycle-dependent returns can explain the cross-section of expected returns of the 47 factor portfolios. A long-short portfolio that exploits this finding has a 5-factor alpha of 0.7% per month during 1963-2019. The results are not explained by factor momentum, investor sentiment, or the mean factor portfolio. My results suggest that the cross-section of factors is better explained by differences in risk profiles across business cycles rather than differences in mispricing.
- Presentations: Boston College PhD Seminar