We examine whether option prices correct for predictable bias in stock prices associated with accounting anomalies. Evidence from put-call parity violations suggests that they do not. Rather, option prices accurately track contemporaneous stock prices. Further analysis suggests that high costs...

We develop a measure of how information events impact investors' perceptions of risk that is broadly applicable and simple to implement. We derive this measure from an option-pricing model where investors anticipate an announcement that simultaneously conveys information on the announcer's...

This study attempts to estimate the fundamental capital value of a growing firm by combining two separate capital valuation techniques, namely the corporate debt valuation of Merton (1974) and the rational pricing technique of internet companies of Schwartz and Moon (2000). For simplicity, the...

This paper contrasts the valuation of accounting numbers related to two classes of assets - the internally managed, fully-controlled assets versus the "significant influence" investments, that is, investments where the investing firm exercises influence, but not control, over the assets. We find...

Implicit in industry standard option pricing models is the expectation that roughly 25% of stocks with 60% consistent volatility will septuple within 10 years, an extraordinary rate of appreciation. The exceptionally high equilibrium anticipated returns for an improbably large percentage of high...

Pushing models to extremes can expose output biases that stem from underlying assumptions. In the case of industry standard option valuation models, long term, high volatility securities provide a stress test vehicle. For instance, in evaluating a stock with 60% volatility, industry standard...

This study attempts to estimate the fundamental capital value of a growing firm by combining two separate capital valuation techniques, namely the corporate debt valuation of Merton (1974) and the rational pricing technique of internet companies of Schwartz and Moon (2000). For simplicity, the...

This paper provides a framework for defining, formulating and evaluating value investment strategies. We define the relative value of an investment in terms of the prospective yield implied by the investment's current price and expected future cash flows. We develop an intuitive and parsimonious...

Regulations impose idiosyncratic capital and funding costs for holding derivatives. Capital requirements are costly because derivatives desks are risky businesses; funding is costly in part because regulations increase the minimum funding tenor. Idiosyncratic costs mean no single measure makes...

We propose a new methodology to identify non-compliance with FASB guidance with respect to the dividend yield and the volatility rate for stock option valuation disclosures. The FASB gives firms some flexibility in choosing these parameters. Accordingly, we take into account a number of...