He, Wei (University of New Orleans) Wei, Peihwang P. (University of New Orleans)
Abstract
Many empirical studies document the value effect. One explanation is that investors overreact to growth aspects for growth stocks. We apply Stein's (1989) method to investigate whether the degree of overreaction differs between value and growth stocks using the implied volatility from option prices. A finding of overreaction for either value stocks or growth stocks would lend support to overreaction as an explanation for the value effect. Empirical results here indicate a stronger degree of overreaction for growth stocks.
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Publisher Info
Paper provided by University of New Orleans, Department of Economics and Finance in its series Working Papers with number
2003-11.