Clearly Irrational Financialmarket Behavior: Evidence Fromthe Early Exercise Of Exchangetraded Stock Options  

Oleh:

Poteshman, Allen M. ; SERBIN, VITALY

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 58 no. 1 (Feb. 2003), page 37-70.
Topik: Financial Market; investors
Fulltext: p 37.pdf (317.66KB)

Isi artikel

This paper analyzes the early exercise of exchange-traded options by different classes of investors over the 1996 to 1999 period. A large number of exercises are identified as clearly irrational without invoking any model of market equilibrium. Customers of discount brokers and customers of full-service brokers both engage in a significant number of irrational exercises while traders at large investment houses exhibit no irrational early exercise behavior. Rational and irrational exercise is triggered for discount and full-service customers by the underlying stock price attaining its highest level over the past year and by high returns on the underlying stock.

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