State pricing, effectively complete markets, and corporate finance

Mark Grinblatt and Kam-Ming Wan

Journal of Corporate Finance, 2020, vol. 60, issue C

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.

Keywords: Event study; Options; State prices; Difference-in-difference method; Identification (search for similar items in EconPapers)
JEL-codes: D44 G14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:60:y:2020:i:c:s0929119919306613

DOI: 10.1016/j.jcorpfin.2019.101542

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