An investigation of the causal relationships between index and component stock implied volatility
Article Abstract:
The causal relationships between index and component implied volatility are discussed. Volatility in the index options and futures market, which is often blamed for the drastic changes in the component cash market, before and after the stock crash in 1987, is evaluated to determine if there are resultant changes in the component markets. It is concluded that although changes have occurred, actions taken by regulators after the 1987 crash have lessened the effects of index options markets' volatility on its component markets.
Publication Name: Managerial Finance
Subject: Business
ISSN: 0307-4358
Year: 1995
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Black Scholes, as compared to observed prices: an empirical study
Article Abstract:
An empirical study on the different inputs used for the Black Scholes (BS) option pricing model is presented. The model, which is widely used in actual market situations and research, uses five variables to compute the price of an European option. The model includes other inputs such as American options, dividend payments and intermittent stock returns. These inputs from the stock market, which is not as efficient as the options market, result in the difference between the calculated price and observed prices.
Publication Name: Managerial Finance
Subject: Business
ISSN: 0307-4358
Year: 1995
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Stock price reaction around changes in product prices
Article Abstract:
An analysis of stockholder reaction to price changes reveals that stockholders react favorably to price increases and display little reaction to price cuts, but are both associated to negative stock returns. Studies conducted between January 1986 and December 1986 with 86 companies in the price increase category and 75 firms in the price reduction category also reveal that companies which change the prices of their products are poor market performers.
Publication Name: Managerial Finance
Subject: Business
ISSN: 0307-4358
Year: 1996
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