Call-Option Pricing and the Turn of the Year

Kevin J Maloney and Richard J Rogalski

The Journal of Business, 1989, vol. 62, issue 4, 539-52

Abstract: Historically, common stocks have had larger returns and variability of returns around the turn of the year and January. The authors find that call option prices reflect these historical patterns ex ante. That is, the higher return variability is anticipated and incorporated into the prices of call options whose trade date and expiration date fall on opposite sides of a turn-of-the-year period. These results suggest that both the turn of the year and the January phenomena are widely anticipated by financial markets before the fact. Copyright 1989 by the University of Chicago.

Date: 1989
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