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Rational early exercise of call options: Australian evidence
Author(s) -
Phang Grace,
Brown Rob
Publication year - 2011
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2010.00370.x
Subject(s) - dividend , economics , financial economics , monetary economics , actuarial science , finance
Alpert (2010) develops a detailed analysis of the conditions for rational early exercise of call options in the presence of taxes. Using Alpert’s analysis as the theoretical framework, we examine the early exercise of call options in Australia over the period from 1 January 2001 to 30 June 2008. We find that exercises occurring on the last cum‐dividend trading day can be fully explained by non‐tax reasons, whilst taxation is a potential explanation for a large proportion of the early exercises that occur at other times.