IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v24y1989i3p335-54.html
   My bibliography  Save this article

A Study of Call Price Behavior under a Stationary Return Generating Process

Author

Listed:
  • Chang, S J
  • Chen, Son-Nan

Abstract

Conventional event study methodologies that require a stationary return generating process are generally not applicable to option studies because options are known to have constantly changing risk-reward characteristics over time. Nevertheless, this paper attempts to analyze call price behavior in response to earnings and dividend surprises using the mean-adjusted return method and the cumulative sum method; both methods assume stationarity. With proper risk-neutralizing modification, along with careful specification of the test design, the authors are able to overcome the difficulty of such time-dependent methodologies. The empirical results show the robustness of the method across calls of different maturities and exercise prices. Copyright 1989 by MIT Press.

Suggested Citation

  • Chang, S J & Chen, Son-Nan, 1989. "A Study of Call Price Behavior under a Stationary Return Generating Process," The Financial Review, Eastern Finance Association, vol. 24(3), pages 335-354, August.
    • Handle: RePEc:bla:finrev:v:24:y:1989:i:3:p:335-54
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sriplung, Kai-one, 1993. "Mispricing in the Black-Scholes model: an exploratory analysis," ISU General Staff Papers 1993010108000011187, Iowa State University, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:24:y:1989:i:3:p:335-54. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.