Journal of Financial Economics Vol. 124 No. 1 2017
Risk, ambiguity, and the exercise of employee stock options
Abstract
We investigate the importance of ambiguity, or Knightian uncertainty, in executives’ stock option exercise decisions. We develop an empirical estimate of ambiguity and include it in regression models alongside the traditional measure of risk, equity volatility. We show that each variable has a significant effect on the timing of option exercises, with volatility causing executives to hold options longer to preserve option value, and ambiguity increasing the tendency for executives to exercise early.
- DOI
- 10.1016/j.jfineco.2016.12.006
- Volume
- 124
- Issue
- 1
- Pages
- 65-85
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref