We concurrently examine price reversals and price continuations that follow extreme one-day price changes in the period 1986–2015. Consistent with the overreaction and underreaction hypotheses, we find that investors overreact to non-information-based price movements and underreact to public...

While the stochastic volatility (SV) generalization has been shown to improvethe explanatory power compared to the Black-Scholes model, the empiricalimplications of the SV models on option pricing have not been adequately tested.The purpose of this paper is to first estimate a multivariate SV...