STOCK RETURN DYNAMICS, OPTION VOLUME, AND THE INFORMATION CONTENT OF IMPLIED VOLATILITY STEWART MAYHEW CHRIS STIVERS* This article reports new empirical results on the information content of implied volatility, with respect to modeling and forecasting the volatility of individual firm returns. The 50 firms with the highest option volume on the Chicago Board Options Exchange between 1988 and 1995 are examined. We would like to thank Bill Lastrapes, Mark Rubinstein, Scott Mixon, and seminar participants at the University of Alabama, the University of Georgia, the Federal Reserve Bank of Atlanta, Arizona State University, and Brigham Young University. Chris Stivers acknowledges financial support from a Sanford-Terry Research Grant from the University of Georgia. Stivers is also a visiting scholar at the Federal Reserve Bank of Atlanta. The views expressed in this article are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Finally, the U.S. Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This study expresses the authors’ views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the SEC staff. *Correspondence author, Terry College of Business, University of Georgia, Brooks Hall, Athens, GA; e-mail: cstivers@terry.uga.edu Received May 2002; Accepted October 2002 ■ Stewart Mayhew is in the Banking and Finance Department at Terry College of Business at the University of Georgia in Athens, GA, and in the Office of Economic Analysis at the U.S. Securities and Exchange Commission in Washington, DC. ■ Chris Stivers is an assistant professor in the Banking and Finance Department at Terry College of Business at the University of Georgia in Athens, GA. The Journal of Futures Markets, Vol. 23, No. 7, 615–646 (2003) © 2003 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/fut.10084