Stock Price Dynamics of Listed Growth Companies - Evidence from the Options Market

31 Pages Posted: 19 May 2006 Last revised: 15 Jul 2009

See all articles by Rainer Baule

Rainer Baule

University of Hagen

Christian Tallau

Münster University of Applied Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: July 15, 2009

Abstract

This paper empirically investigates the stock price dynamics implied by the valuation model proposed by Schwartz and Moon (2001) for growth companies. We test the hypothesis that the inherent stochastic process for the firm equity value better describes the actual dynamics than standard geometric Brownian motion. Because the form of the stochastic process decisively influences the values of options written on a firm's stock, we rely on price information from the options market to test the hypothesis. Contrary to our expectations, we find no evidence that the Schwartz-Moon model is superior in explaining the options market for growth companies.

Keywords: growth companies, implied volatility, option pricing, Schwartz-Moon model, stock price dynamics

JEL Classification: G13

Suggested Citation

Baule, Rainer and Tallau, Christian, Stock Price Dynamics of Listed Growth Companies - Evidence from the Options Market (July 15, 2009). Available at SSRN: https://ssrn.com/abstract=903375 or http://dx.doi.org/10.2139/ssrn.903375

Rainer Baule (Contact Author)

University of Hagen ( email )

Universitaetsstrasse 41
Hagen, 58097
Germany

Christian Tallau

Münster University of Applied Sciences ( email )

Corrensstrasse 25
Muenster, 48149
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
415
Abstract Views
1,909
rank
73,617
PlumX Metrics