Psychological Factors and Stock Option Exercise

Chip Heath, Steven J. Huddart, Mark H. Lang
1998 Social Science Research Network  
We investigate stock option exercise decisions by over 50,000 employees at seven corporations. Controlling for economic factors, psychological factors in uence exercise. Consistent with psychological models of beliefs, employees exercise in response to stock price trends-exercise is positively related to stock returns during the preceding month and negatively related to returns over longer horizons. Consistent with psychological models of values that include reference points, employee exercise
more » ... employee exercise activity roughly doubles when the stock price exceeds the maximum price attained during the previous year.
doi:10.2139/ssrn.77488 fatcat:4kf3swxbuzdu3o2cqxqc6xbga4