1,576 research outputs found
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The Information Contained in The Exercise of Executive Stock Options
This paper investigates the use by insiders of private information in their decision to
exercise executive stock options. It is the first to categorise the exercise of an executive stock
option by the proportion of stock sold at exercise. Consistent with existing research, exercises
overall do not yield subsequent abnormal returns. However, we find a marked and significant
difference in subsequent performance between exercises categorised as ‘high’ and ‘low’ sale
proportion respectively. Therefore, while the exercise decision may appear uninformed, this
study demonstrates that executives do use private information in their exercise and
corresponding sale decisions. Further, near-the-money exercises produce negative abnormal
returns, consistent with such exercises being relatively expensive. These results need to be
reflected in the valuation of executive stock options, and hence the compensation executives
derive from them
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Executive Stock Option Exercises and the Predictive Ability of Transaction Value
This paper investigates the predictive ability of executives’ stock option
exercises by categorising all exercises by the overall value of the transaction.
This measure incorporates the cost to the executive of exercising the option,
together with the income generated by the associated sale of stock at the time
of exercise. As a result, we show that, in contrast to the existing literature,
executive stock option exercises do have predictive ability for future stock
returns. This is, however, limited to transactions that generate net revenue for
the executive, a finding that is the reverse of the evidence relating to standard
executive transactions
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The Equity Premium
Recent research on the equity risk premium has questioned the ability of historical
estimates of the risk premium to provide reliable estimates of the expected risk
premium. We calculate the equity risk premium for a number of countries over longer
horizons than has been attempted to date. We show that the realised US equity
premium is consistent with the premia obtained elsewhere. Furthermore, using well
over a century of data, we find that current estimates of the equity premia are close to
those observed during the pre-1914 era. This is of particular relevance given the
argument that the financial environment during that period bears a closer resemblance
to today than the 1914-1945 period, and possibly also the 1945-1971 period. This
points to a current equity risk premium that is considerably lower than consensus
forecasts (Welch 2001)
Development of the Combined Electron Cyclotron Emission (ECEI) and Microwave Imaging Reflectometer (MIR) System for LHD Plasmas Experiment
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