unemployment drugs and attitudes among european youth this paper studies changes in the patterns of drug consumption and attitudes towards drugs in relation to sky high youth unemployment rates brought about by the great recession our analysis is based on data for 28 european countries that refer to young people we find that the consumption of cannabis and new substances is positively related to increasing unemployment rates an increase of 1 in the regional unemployment rate is associated with an increase of 0 7 percentage points in the ratio of young people who state that they have consumed cannabis at some point in time our findings also indicate that higher unemployment may be associated with more young people perceiving that access to drugs has become more difficult particularly access to ecstasy cocaine and heroin according to young europeans when the economy worsens anti drug policies should focus on the reduction of poverty and unemployment and not on implementing tougher measures against users

program trading and expiration day effects the arbitrage between index futures and the underlying cash index and the cash settlement feature of index futures contracts which requires arbitrageurs to unwind positions in the stock market are thought to be at the heart of the abnormal stock price movements during the triple witching hour the last hour of trading on days on which index futures index options and options on index futures expire simultaneously during 1984 and 1985 volume was substantially higher than normal in the last hour of trading on those quarterly fridays open interest in the expiring futures contracts on the expiration day amounted to about 40 per cent of the average month end open interest the incremental stock market volume however was approximately one third the volume that would be inmplied if the entire expiration day open interest were traded in the stock market analysis of stock market price changes in the last hour of expiration days and the first halfhour of the following day indicates that the volatility of price changes was significantly higher on expiration days with the stock market tending to fall stocks not in the sp index option expirations themselves did not lead to abnormal market movements when the magnitude of price effects was measured by the degree of reversal in prices on the morning after the expiration day the average magnitude of the price effect in the 10 most recent quarterly futures contract expirations examined was about 0 4 per cent of the closing index value at expiration the average expiration day price effect of 0 4 per cent is not large considering that a price impact of approximately 0 25 per cent of the value of the transaction can be expected on the basis of the bid ask spread once this market impact cost is drawn out the average expiration day price impact falls to about 0 15 per cent of the value of the transaction an amount representing the additional cost of liquidity furthermore price impacts in excess of those found on expiration days are frequently encountered in large block transactions where the cost of providing liquidity also increases on expiration days however transactions in many stocks occur simultaneously so the market as a whole is affected

the term structure of volatility implied by foreign exchange options this paper illustrates regression and kalman filtering methods for estimating the time varying term structure of volatility expectations revealed by options prices short and long term expectations are estimated for four currencies using daily phlx options prices from 1985 to 1989 throughout this period there were important differences between shortand long term expectations the slope of the term structure changed frequently and there were significant variations in long term volatility expectations the expectation estimates can be used to value otc options to improve hedging strategies and to test the hypothesis that the options market overreacts

a comparison of petroleum futures versus spot prices as predictors of prices in the future abstract even though studies have indicated that the futures market leads the spot market in price discovery this paper hypothesizes that the predictive significance of each should be the same a number of different statistical tests are presented to test this hypothesis when deseasonalized data is employed the predictive significance of each series is found to be the same but when actual prices are employed futures prices did correctly anticipate the observed seasonal pattern

option prices as predictors of equilibrium stock prices the black scholes option pricing model modified for dividend payments is used to calculate jointly implied stock prices and implied standard deviations a comparison of the implied stock prices with observed stock prices reveals that the implied prices contain information regarding equilibrium stock prices that is not fully reflected in observed stock prices the implications of this finding are discussed this study investigates the role of call option prices as predictors of the equilibrium prices of their underlying stocks using the black scholes 3 bs model previous tests of the bs model have shown that the formula is highly successful in explaining the observed market prices of options see black and scholes 2 galai 8 chiras and manaster 6 and macbeth and merville 12 according to the model the option price is a function of the current value of the underlying stock the instantaneous variance of the stock s rate of return the time to maturity of the option the risk free rate of interest and the exercise price of the option 1 given an observed option price and known values of all input parameters to the bs model except the stock price one can determine the price of the underlying stock that equates the observed option price to its calculated value it follows from the underlying logic of the model that the implied price is the value of the underlying stock for which a continuously revised option bond portfolio would be a perfect substitute for the stock hence if options are actually priced according to the model implied stock prices will be the option market s assessment of equilibrium stock values previous empirical studies have assumed that observed stock prices are the relevant stock prices for option valuation however just as stock prices may differ in the short run from one exchange to another i e nyse midwest

oil prices the role of refinery utilization futures markets and non linearities we test the hypothesis that real oil prices are determined in part by refinery capacity non linearities in supply conditions and or expectations and that observed changes in these variables can account for the rise in prices between 2004 and 2006 results indicate that the refining sector plays an important role in the recent price increase but not in the way described by many analysts the relationship is negative such that higher refinery utilization rates reduce crude oil prices this effect is associated with shifts in the production of heavy and light grades of crude oil and price spreads between them non linear relationships between opec capacity and oil prices as well as conditions on the futures markets also account for changes in real oil prices together these factors allow the model to generate a one step ahead out of sample forecast that performs as well as forecasts implied by far month contracts on the new york mercantile exchange and is able to account for much of the 27 rise in crude oil prices between 2004 and 2006

employment unemployment and demand shifts in local labor markets this paper analyzes the effects of demand shifts within and between local labor markets on unemployment and employment outcomes observed in those markets the demand shifts are calculated from sales growth data at the firm and industry levels the results show that in general employment and wage adjustments by firms are primarily driven by shifts in labor demand demand shifts between local areas account for large fractions of the observed variation in unemployment and employment rate levels and changes across areas within area shifts cause much smaller and insignificant amounts of unemployment and only if they are between industry copyright 1991 by mit press

the value of shorting abstract this paper assesses the effects of short sale constraints on asset prices the analysis focuses on a particular period in sweden during which shorting stocks was impossible but stock options were traded firstly the effect on both stock options and the underlying stock was investigated jointly by considering deviations from put call parity secondly the effects on only the derivatives were investigated by considering their implied volatilites the main findings are i the impact on pricing are consistent with a short sale constraint ii these effects are much more pronounced when shorting is not possible iii these effects are not solely attributable to the mispricing of the stock as previous research indicates and iv access to international shorting markets can alleviate local short sale constraints

the distributional effects of local labor demand and industrial mix estimates using individual panel data abstract this paper finds that increases in local labor demand have significant progressive effects on the income distribution and significantly reduce poverty the anti poverty effects of stronger demand have not lessened in recent years local labor demand s benefits are particularly great for younger less educated men labor demand s benefits are similar for blacks and whites and men and women the paper also finds that shifts in the local industrial mix toward manufacturing or other high wage industries do not have progressive effects and do not reduce poverty

disaggregating the effect of the business cycle on the distribution of income this paper disaggregates total household income into a complete set of components and studies the comparative cyclicality of these com ponent to economic growth comparisons of the relative responsiveness to gnp growth of wages hours of work and total labor market income of heads and wives and transfer income sources of households are made across income race sex and age groups this provides a picture of the channels by which economic growth produces income change significant differences in elasticities are found to exist both between different income components and between different population groups for the same component the narrowing income distribution in times of high growth occurs primarily because of large elasticities on head s labor market income among the poor both wages and hours show evidence of cycli cality the labor market earnings of women both wives and household heads is far less responsive to growth cyclicality in transfer income varies enormously between population groups and by type of transfer

nonlinear expectations in speculative markets evidence from the ecb survey of professional forecasters chartist and fundamentalist models have proven to be capable of replicating stylized facts on speculative markets in general this is achieved by specifying nonlinear interactions of otherwise linear asset price expectations of the respective trader groups this paper investigates whether or not regressive and extrapolative expectations themselves exhibit significant nonlinear dynamics the empirical results are based on a new data set from the european central bank survey of professional forecasters on oil price expectations in particular we find that forecasters form destabilizing expectations in the neighborhood of the fundamental value whereas expectations tend to be stabilizing in the presence of substantial oil price misalignment

large option trades market makers and limit orders this article focuses on the difference between market makers and limit orders in their role as suppliers of liquidity for both sources of liquidity i analyze the price behavior of stocks and options around large option trades and i estimate the premium paid by the initiator of the large trade my findings suggest that limit orders for options are picked off after adverse changes in the underlying stock price furthermore i find that for these transactions there is a permanent change in quotations in the direction of the transaction after transactions where market makers supply liquidity quotes tend to return to their pretrade level article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

economic conditions and alcohol problems this study investigates the relationship between macroeconomic conditions and two alcohol related outcomes liquor consumption and highway vehicle fatalities fixed effect models are estimated for the 48 contiguous states over the 1975 1988 time period alcohol consumption and traffic deaths vary procyclically with a major portion of the effect of economic downturns attributed to reductions in incomes rather than employment the intake of hard liquor is the most sensitive to the state of the macroeconomy there is no evidence however that fluctuations in economic conditions have a disproportionate impact on the drunk driving of young adults

initial margin policy and stochastic volatility in the crude oil futures market this article examines the relationship between the volatility of the crude oil futures market and changes in initial margin requirements to closely match changes in futures market volatility with the corresponding changes in margin requirements we infer the volatility of the futures market from the prices of crude oil futures options contracts using a mean reverting diffusion process for volatility we show that changes in margin policy do not affect subsequent market volatility

the weekend effect on the distribution of stock prices abstract evidence of weekend effects on the distribution of security returns suggests that returns are generated by a process operating closer to trading time rather than calendar time in contrast accumulation of interest over the weekend follows a calendar time process since both the variance of returns and the interest rate are important parameters of the black scholes option pricing model this paper suggests that the model be stated to account for this by utilizing a trading time variance and a calendar time interest rate empirical evidence indicates that this allows the model to better explain market option prices

does drinking really decrease in bad times this paper investigates the relationship between macroeconomic conditions and drinking using individual level data from 1987 to 1999 interview years of the behavioral risk factor surveillance system brfss we confirm the procyclical variation in overall drinking identified in previous research using aggregate sales data and show that this largely results from changes in consumption by existing drinkers rather than movements into or out of drinking moreover the decrease occurring during bad economic times is concentrated among heavy consumers with light drinking actually rising we also find no evidence that the decline in overall alcohol use masks a rise for persons becoming unemployed during contractions these results suggest that any stress induced increases in drinking during bad economic times are more than offset by declines resulting from changes in economic factors such as lower incomes

hedging the risks from writing foreign currency options abstract this paper considers the ways in which banks and other financial institutions can hedge their risks when they write non exchange traded foreign currency options key factors affecting the performance of delta hedging are identified and hedging schemes involving the use of exchange traded options are analyzed the schemes are tested using both simulated data and data from trades on the philadelphia exchange between february 1983 and september 1984

s p 100 index option volatility using transaction data on the s p 100 index options we study the effect of valuation simplifications that are commonplace in previous research on the timeseries properties of implied market volatility using an american style algorithm that accounts for the discrete nature of the dividends on the s p 100 index we find that spurious negative serial correlation in implied volatility changes is induced by nonsimultaneously observing the option price and the index level negative serial correlation is also induced by a bid ask price effect if a single option is used to estimate implied volatility in addition we find that these same effects induce spurious and unreasonable negative cross correlations between the changes in call and put implied volatility an important area of current research is the estimation and behavior of market volatility implied by option pricing models for example stein 1989 concludes that the s p 100 index option market is inefficient because longer term options overreact to changes in the implied volatility of short maturity options day and lewis 1988 document an increase in volatility around the quarterly expiration cycle schwert 1990 draws conclusions about the behavior of volatility around the stock market crash of 1987 by using implied volatility all of these studies use a simplified option pricing framework to estimate implied market volatility previous research generally assumes that the s p 100 index option is european style this option is actually american style it is also common to assume that the dividend yield is constant the dividends are not constant and exhibit distinct seasonal patterns harvey and whaley 1991b show that large pricing errors can be induced in the option prices if the american feature and the discrete dividends are ignored option pricing errors translate into errors in the implied volatility estimates this paper uses s p 100 index call and put transactions and an american style option pricing model with the exact discrete dividend series to calculate a time series of implied volatilities this valuation method

do minimum wage increases influence worker health this study investigates whether minimum wage increases impact worker health in the united states we consider self reported measures of general mental and physical health we use data on lesser skilled workers from the 1993 to 2014 behavioral risk factor surveillance survey among men we find no evidence that minimum wage increases improve health instead we find that such increases lead to worse health outcomes particularly among unemployed men we find both worsening general health and improved mental health following minimum wage increases among women these findings broaden our understanding of the full impacts of minimum wage increases on lesser skill workers jel i1 i11 i18

the relation between implied and realized volatility abstract previous research finds the volatility implied by s p 100 index option prices to be a biased and inefficient forecast of future volatility and to contain little or no incremental information beyond that in past realized volatility in contrast we find that implied volatility outperforms past volatility in forecasting future volatility and even subsumes the information content of past volatility in some of our specifications our results differ from previous studies because we use longer time series and nonoverlapping data a regime shift around the october 1987 crash explains why implied volatility is more biased in previous work

the risk premium of volatility implicit in currency options this article provides an empirical investigation of the risk neutral variance process and the market price of variance risk implied in the foreign currency options market there are three principal contributions first the parameters of heston s mean reverting square root stochastic volatility model are estimated using dollar mark option prices from 1987 to 1992 second it is shown that these implied parameters can be combined with historical moments of the dollar mark exchange rate to deduce an estimate of the market price of variance risk these estimates are found to be nonzero time varying and of sufficient magnitude to imply that the compensation for variance risk is a significant component of the risk premia in the currency market finally the out of sample test suggests that the historical variance and the hull and white implied variance contain no more information than that imbedded in the heston implied variance

estimating and forecasting the real prices of crude oil a data rich model using a dynamic model averaging dma approach given that oil price fluctuations have been of great interest for macroeconomics in the recent years due to its important implications for future inflation economic growth and policy making the aim of this paper is to estimate and forecast west texas intermediate wti crude oil prices using a large monthly dataset that covers the period from march 1983 to december 2011 to achieve this aim forecasting with factor models offers a usual approach that utilizes large datasets however a forecasting model which simply includes all factors in state space equation and does not allow for time varying may be not suitable with a highly volatile market such as oil market to overcome these limitations an approach that accounts both for parameter and model uncertainty is employed in particular this study uses the dynamic model averaging dma approach suggested by koop and korobilis 2012 the key element of the dma approach is that it allows both for model and parameter to vary at each point of time by doing so the dma is robust to structural breaks empirical findings show that dma approach outperforms any other alternative model used in the forecasting exercise results also show that there is model but not parameter variation in this oil price forecasting exercise finally the findings suggest that the dma approach provides a better proxy of expected spot prices than future prices

the relative performance of five alternative warrant pricing models five warrant pricing models are examined in this study a pair based on the black scholes model a pair based on the constant elasticity of variance cev modification and an extendible warrant model a la longstaff based on more than 20 000 warrant price observations the flexible exponent cev model generates the lowest average absolute pricing error in most of the warrants examined the dilution adjusted black scholes model however remains a reasonable economical alternative in many cases

the behavior of the volatility implicit in the prices of stock index options abstract we examine stock market volatility around the quarterly expirations of stock index futures contracts and nonquarterly expirations of stock index options using estimates of the volatility implicit in the option prices the option prices reflect increases in the volatility of the underlying stock indexes around both quarterly and nonquarterly expiration dates analysis of the residual returns on index options provides evidence consistent with an unexpected increase in market volatility around expiration dates

the valuation of american call options and the expected ex dividend stock price decline abstract this study focuses on the ex dividend stock price decline implicit within the valuation of american call options on dividend paying stocks the roll 1977 american call option pricing formula and the observed structure of cboe call option transaction prices are used to infer the expected ex dividend stock price decline as a proportion of the amount of the dividend the relative decline is shown to be not meaningfully different from one confirming some recent evidence from studies which examined stock prices in the days surrounding ex dividend

the role of economic shocks on health evidence from german reunification sudden economic shocks impact the everyday lives of people from one day to the next a number of studies have examined the association between economic fluctuations and health however no consensus on the nature of this relationship has been established by exploiting the dramatic economic fluctuations following the german reunification of 1990 which included a sudden change from a socialist to a capitalist system in east germany this study examines the association between broad negative economic shocks and health the article finds that increases in state unemployment rates are associated with large and statistically significant declines in health outcomes estimates are stronger for people who became unemployed shortly after reunification for low income individuals and for east germans a group confronted with larger economic fluctuations when examining potential mechanisms that could explain the observed health deteriorations the study finds significant reductions in exercise frequency and increases in economic uncertainty and overall stress

unemployment and health behaviors over the business cycle a longitudinal view we examine the first order internal effects of unemployment and nonemployment on a range of health behaviors during the most recent recession using longitudinal data from the panel study of income dynamics and the national longitudinal survey of youth 1979 ours is the first study to analyze the effect of own unemployment on energy intake energy expenditure and the net effect body mass index using longitudinal records exploiting information enveloping the recent steep recession and prolonged recovery is valuable since recent job losers will modify their behavior little if they expect soon to be re employed whereas if they expect joblessness to last they will adjust to a possibly prolonged decline in income and increase in nonwork time we find that becoming unemployed is associated with a small increase in leisure time exercise a moderate decrease in smoking and a substantial decline in total physical activity we also find that unemployment and nonemployment are associated with a decline in purchases of fast food together these results imply that both energy consumption and expenditure may decline in the united states during recessions the net result being essentially no change in body weight there is considerable heterogeneity in these effects across specific health behaviors across the intensive and extensive margins across the outcome distribution and across gender

on the predictive accuracy of crude oil futures prices abstract this paper evaluates the predictive accuracy of 1 3 6 9 and 12 month ahead crude oil futures prices for 1991 01 2001 12 in addition to testing for unbiasedness a naive forecasting model is constructed to generate comparable forecasts as benchmarks our empirical findings reveal that futures prices and naive forecasts are unbiased at all forecast horizons however the 1 and 12 month ahead futures prices are the only forecasts outperforming the naive suggesting their potential usefulness in policy making continuing political instability of the middle east and the inability of opec to offset market sentiment among other factors may in the future adversely affect the predictive accuracy of the 1 and 12 month ahead futures prices accordingly caution must be exercised when utilizing such prices as a forecasting tool

time varying volatilities and calculation of the weighted implied standard deviation rogalski tinic have reported a monthly pattern in ex post stock return variances that differs between small and large market capitalization firms maloney rogalski find that option prices reflect these monthly patterns ex ante this study extends maloney rogalski s work by devising an expiration specific weighted implied standard deviation wisd it is found that i the monthly patterns in one month wisds are basically similar to the monthly patterns in ex post variances detected by rogalski tinic for both large and small size firms and ii use of expiration specific wisds as opposed to standard composite wisds results in improved performance of option pricing models

unbiasedness and time varying risk premia in the crude oil futures market abstract this paper presents some empirical evidence on market efficiency and unbiasedness in the crude oil futures market and some related issues on the basis of monthly observations on spot and futures prices of the west texas intermediate wti crude oil several tests are carried out on the relevant hypotheses the evidence suggests that futures prices are neither unbiased nor efficient forecasters of spot prices furthermore a garch m 1 1 model reveals the existence of a time varying risk premium

the rationality of early exercise decisions evidence from the s p 100 index options market this study provides a comprehensive empirical analysis of the early exercise bistoty of sp but we show that a substantal number of these decisions are clearly irratonal since it would bave been possible to realize a larger riskless net cash jlow by seuling unlike p us studies of early exercise our tests of efflciency and the rationat decions tbatpresumably lead to eficient markets are model independet we also provide evidence concerning the relatve significance of dividends and the wild card to index optonpricing models and introduce and document the importance of the opton to exercise and avoid the indirect costs oftbe spread we alsofind evidence of a significant day of tbe week exercise effect and present some likely explanations for that effect

the lasting effects of leaving school in an economic downturn on alcohol use the author tests whether leaving school in an economic downturn persistently affects alcohol use she models alcohol use in middle age as a function of the state unemployment rate at school leaving in the national longitudinal survey of youth 1979 cohort the results suggest that men but not women who leave school in an economic downturn consume more drinks and are more likely to report heavy and binge drinking than otherwise similar men findings are robust to addressing the endogeneity of the time and location of school leaving and contribute to the literature on the lasting consequences of leaving school in an economic downturn

errors in implied volatility estimation estimating implied volatility by inverting the black scholes formula is subject to considerable error when option characteristics are observed with plausible errors especially for options away from the money large changes in volatility produce small changes in option prices conversely small errors in option prices and other option characteristics produce large errors in implied volatilities in the presence of small measurement errors unobserved truncation of option prices that violate lower bounds for absence of arbitrage can also lead to systematic volatility smiles the paper proposes feasible gls estimators that reduce the noise and bias in implied volatility estimates

tests of an american option pricing model on the foreign currency options market this paper tests the ability of the american option pricing model proposed by parkinson 18 or mason 14 to explain the pricing of the foreign currency options traded on the philadelphia stock exchange from february 28 1983 to march 26 1985 we find that the model underprices out of the money options relative to at the money and in the money options this relative underpricing is driven by an underpricing of out of the money call options of short maturity in addition the degree of relative mispricing for most categories of options is shown to be a decreasing function of the time to maturity of the options longer maturity options appear to trade at similar levels of implied volatility whether they are in at or out of the money most of these biases appear consistent with the fact that the underlying spot currency rate follows a mixed jump diffusion process as described in 17

pro cyclical mortality across socioeconomic groups and health status abstract using variation across geographic regions a number of studies from the u s and other developed countries have found more deaths in economic upturns and less deaths in economic downturns we use data from regions in norway for 1977 2008 and find the same pro cyclical patterns using individual level register data for the identical population we find that disadvantaged socioeconomic groups are not hit harder by pro cyclical mortality than advantaged groups we also find that other indicators of deteriorated health than death like becoming disabled are pro cyclical overall our analysis suggests that pro cyclical mortality is rather related to deaths of people already in deteriorated health than to people of low socioeconomic status

an economy of scales a selective review of obesity s economic causes consequences and solutions this paper reviews the economic research on obesity covering topics such as the measurement of and trends in obesity the economic causes of obesity e g the monetary price and time cost of food food assistance programs income education macroeconomic conditions and peer effects and the economic consequences of obesity e g lower wages a lower probability of employment and higher medical care costs it also examines the extent to which obesity imposes negative externalities and economic interventions that could potentially internalize such externalities such as food taxes subsidies for school based physical activity programs and financial rewards for weight loss it discusses other economic rationales for government intervention with respect to obesity such as imperfect information time inconsistent preferences and irrational behavior it concludes by proposing a research agenda for the field overall the evidence suggests that there is no single dominant economic cause of obesity a wide variety of factors may contribute a modest amount to the risk there is consistent evidence regarding the economic consequences of obesity which are lower wages and higher medical care costs that impose negative externalities through health insurance studies of economic approaches to preventing obesity such as menu labeling taxes on energy dense foods and financial rewards for weight loss find only modest effects on weight and thus a range of policies may be necessary to have a substantial effect on the prevalence of obesity

recessions healthy no more abstract over the 1976 2010 period total mortality shifted from strongly procyclical to being weakly or unrelated to macroeconomic conditions the association is likely to be poorly measured when using short less than 15 year analysis periods deaths from cardiovascular disease and transport accidents continue to be procyclical however countercyclical patterns have emerged for fatalities from cancer mortality and external causes among the latter non transport accidents particularly accidental poisonings play an important role

local labor market fluctuations and health is there a connection and for whom we examine the relationship between local labor market conditions and several measures of health and health behaviors for a sample of working aged men living in the 58 largest metropolitan areas in the united states we find evidence of procyclical relationships for weight related health and mental health for men with low ex ante employment probabilities separate estimates suggest worsening labor market conditions lead to weight gains and reduced mental health among african american men and lower mental health among less educated males among our findings those related to mental health are most pronounced

on the valuation of american call options on stocks with known dividends both the roll and the geske equations for the valuation of the american call option on a stock with known dividends are incorrectly specified this note presents the corrected valuation formula explains the misspecifications and provides a numerical example

the creation and resolution of market uncertainty the impact of information releases on implied volatility we model and examine the impact of information releases on market uncertainty as mea sured by the implied standard deviation isd from option markets distinguishing between scheduled and unscheduled announcements we hypothesize that since the timing although not the content of scheduled announcements is known a priori the pre release isd will impound the anticipated impact of important releases on price volatility and that the isd will normally decline post release as this uncertainty is resolved conversely we hypothesize that the unexpected high volatility caused by major unscheduled releases will cause market participants to adjust upward their estimates of likely volatility over the remaining life of the option resulting in an increase in the isd our evidence supports both hypotheses the isds that we consider are from the t bond eurodollar and deutschemark options markets we examine scheduled macroeconomic news releases such as the employment report and the ppi we also find that the observed tendency for the isd to fall on fridays and rise on mondays is due to the weekday pattern of scheduled news releases

the stochastic behaviour of market variance implied in the prices of index options the purpose of this paper is to examine the time series properties of volatilities and to consider various financial and real variables that may be correlated with innovations in expected volatility the measure used in this study is the black scholes volatility implied in weekly call option prices written on the spot price of the ftse index a u k market equity index first the authors determine if capital structure can explain the relation between changes in the volatility of equity and structure can explain the relation between changes in the volatility of equity and changes in the level of the index second they analyze whether innovations in the volatilities of prices of real variables could also explain changes in equity volatility including the volume of transactions in equities oil prices exchange rates nominal and real interest rates and inflation copyright 1991 by royal economic society

a note on a simple accurate formula to compute implied standard deviations abstract we derive a simple accurate formula to compute implied standard deviations for options priced in the classic framework developed by black and scholes 1973 and merton 1973 when a stock price is equal to a discounted strike price this formula reduces to a formula provided by brenner and subrahmanyam 1988 however their formula s accuracy is sensitive to stock price deviations from a discounted strike price the formula derived here extends the range of accuracy to a wide band of option moneyness

the impact of stock market fluctuations on the mental and physical well being of children the stock market crash of 2008 caused a severe impact to households earlier research has explored the impacts of a stock market crash on life well being psychological stress and adult health behaviors we extend this literature by documenting impacts of stock market fluctuations on a range of child outcomes including effects on both mental and physical health we show a negative effect of a market crash on hospitalizations child reported health status sick days from school and an aggregate health index measure both graphical and regression based analysis reveal that our results are not driven by a preexisting trend of declining child health before the market crash and extensive sensitivity analysis demonstrates that the results are robust to multiple empirical specifications jel i15 e32 j13

industrial shifts skills levels and the labor market for white and black males in this paper we estimate the effects of industrial shifts in the 1970s and 1980s on the wages and employment of black and white males we use micro census data for 52 msa s and estimate effects separately by age and education group the results show that industrial shifts did reduce demand for blacks and for less skilled males in the 1970s and 1980s demand shifts away from manufacturing in particular reduced employment and wages for black and white males while the magnitudes of these effects are fairly small for many groups they can account for one third to one half of the employment decline for less educated young blacks in the 1970s these results imply fairly large effects on the earnings of less skilled males in the 1980s as well authors

the informational content of ex ante forecasts the informational content of different forecasts can be compared by regressing the actual change in a variable to be forecasted on forecasts of the change we use the procedure in fair and shiller 1987 to examine the informational content of three sets of ex ant forecasts the american statistical association and national bureau of economic research survey asa data resources incorporated dri and wharton economic forecasting associates uefa we compare these forecasts to each other and to quasi ex ante forecasts generated from a vector autoregressive model an autoregressive components model and a large scale structural model the fair model

a bayesian approach to modeling stock return volatility for option valuation new measures of stock return volatility are developed to increase the precision of stock option price estimates with bayesian statistical methods volatility estimates for a given stock are developed using prior information on the cross sectional patterns in return volatil ities for groups of stocks sorted on size financial leverage and trading volume call option values computed with the bayesian procedure generally improve prediction accuracy for market prices of call options relative to those computed using implied volatility standard historical volatility or even the actual ex post volatility that occurred during each option s life although the bayesian methods produce biased call price estimators they do reduce the systematic tendency of standard pricing approaches to overprice underprice options on high low volatility stocks little bias improvement is observed with respect to the time to maturity and moneyness of the call options

valuation of american call options on dividend paying stocks empirical tests abstract this paper examines the pricing performance of the valuation equation for american call options on stocks with known dividends and compares it with two suggested approximation methods the approximation obtained by substituting the stock price net of the present value of the escrowed dividends into the black scholes model is shown to induce spurious correlation between prediction error and 1 the standard deviation of stock return 2 the degree to which the option is in the money or out of the money 3 the probability of early exercise 4 the time to expiration of the option and 5 the dividend yield of the stock a new method of examining option market efficiency is developed and tested

the systematic risk of discretely rebalanced option hedges this paper demonstrates that black scholes option pricing model hedge positions that are risk free when rebalanced continuously will frequently exhibit substantial systematic risk when rebalanced at finite intervals this systematic risk may have biased important empir ical tests of the option pricing model moreover this systematic risk means that the blackscholes option pricing model is inherently inconsistent with the discrete time version of the capital asset pricing model capm