| Title |
Straddle Option Profitability in Corporate Lawsuits
|
| Author |
Wind, Erica A.
Laux, Judith A.
|
| Type of Resource |
text
|
| Digital Origin |
born digital
|
| Date Created |
2007-05
|
| Abstract |
The current study investigates whether abnormal returns may be gained by purchasing a straddle position prior to a verdict or settlement announcement in a lawsuit. The basis for the hypothesis stems from behavioral finance - more specifically, the Overreaction Hypothesis. Using CAPM expected rates of return and comparisons of 31 lawsuit firms' straddle returns, three new straddle trading strategies are devised. Within the sample of lawsuits, abnormal returns are evident for the three strategies. The results and their implications support behavioral finance and the Overreaction Hypothesis and thus refute the Efficient Markets Hypothesis.
|
| Keywords |
straddle
lawsuit
CAPM
overreaction hypothesis
efficient markets
|
| Rights Statement |
Copyright restrictions apply. Contact the author for permission to publish.
|
| Note (admin) |
Acquired as PDF from Colorado College Department of Economics and Business. Converted to PDF/A1.b using Adobe Acrobat Professional.
|
| Publisher |
Colorado College
|
| Place of Publication |
Colorado Springs, Colorado
|
| Local Identifier |
2007-03
|
| Handle |
http://hdl.handle.net/10176/coccc:2618
|
