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.
| Original language | English |
|---|---|
| Pages (from-to) | 229-250 |
| Number of pages | 22 |
| Journal | Review of quantitative finance and accounting |
| Volume | 23 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - Nov 2004 |
Bibliographical note
The original publication is available at springerlink.comKeywords
- implied density functions
- index options
- macroeconomic news