Does anyone trade with risk reversals here as an indicator of future PA? Or better still, does anyone have any solid research to back up they have any predictive value whatsoever?
I know their the market's best guess of future direction, but they're not much use unless they really are predictive. So... bring forth the evidence!
According to these academics:
http://www.ljmu.ac.uk/AFE/AFE_docs/cibef0401.pdf
... there's nothing in them. But I keep an open mind because we all know academics couldn't trade their way out of a paper bag and if they were sharp enough to discover something useful they'd run off and set up a hedge fund.
Thoughts?
I know their the market's best guess of future direction, but they're not much use unless they really are predictive. So... bring forth the evidence!
According to these academics:
http://www.ljmu.ac.uk/AFE/AFE_docs/cibef0401.pdf
... there's nothing in them. But I keep an open mind because we all know academics couldn't trade their way out of a paper bag and if they were sharp enough to discover something useful they'd run off and set up a hedge fund.
Thoughts?