State pricing, effectively complete markets, and corporate finance

Mark Grinblatt, Kam-Ming Wan

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Event study, panel regression, and difference-in-difference techniques are among the most prominent research methodologies in corporate finance. However, these techniques are inappropriate if corporate events are anticipated to some degree, as most events are. This paper proposes options as an additional model-free source of information to identify the likelihood and impact of corporate events. We show how to quantify event impact in a simple example and assert that few restrictions on the state space are required for the approach to work in more complex settings.
Original languageEnglish
Article number101542
Peer-reviewed scientific journalJournal of corporate finance
Volume60
Number of pages8
ISSN0929-1199
DOIs
Publication statusPublished - 06.11.2019
MoE publication typeA1 Journal article - refereed

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Keywords

  • 511 Economics
  • Event study
  • Options
  • State Prices
  • Difference-in-difference method
  • Identification

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