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Stock Price Distributions and News: Evidence from Index Options

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  • James M. Steeley

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Abstract

We estimate the shape of the distribution of stock prices using data from options on the underlying asset, and test whether this distribution is distorted in a systematic manner each time a particular news event occurs. In particular we look at the response of the FTSE100 index to market wide announcements of key macroeconomic indicators and policy variables. We show that the whole distribution of stock prices can be distorted on an event day. The shift in distributional shape happens whether the event is characterized as an announcement occurrence or as a measured surprise. We find that larger surprises have proportionately greater impact, and that higher moments are more sensitive to events however characterised.

Suggested Citation

  • James M. Steeley, 2004. "Stock Price Distributions and News: Evidence from Index Options," Review of Quantitative Finance and Accounting, Springer, vol. 23(3), pages 229-250, November.
  • Handle: RePEc:kap:rqfnac:v:23:y:2004:i:3:p:229-250
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    1. repec:wsi:rpbfmp:v:20:y:2017:i:03:n:s0219091517500175 is not listed on IDEAS
    2. repec:eee:finana:v:52:y:2017:i:c:p:281-291 is not listed on IDEAS
    3. Vortelinos, Dimitrios I. & Koulakiotis, Athanasios & Tsagkanos, Athanasios, 2017. "Intraday analysis of macroeconomic news surprises and asymmetries in mini-futures markets," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 150-168.

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