Psychological factors and stock option exercise

Chip Heath, Steven J. Huddart, Mark Lang

Research output: Contribution to journalArticle

223 Citations (Scopus)

Abstract

We investigate stock option exercise decisions by over 50,000 employees at seven corporations. Controlling for economic factors, psychological factors influence 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 activity roughly doubles when the stock price exceeds the maximum price attained during the previous year.

Original languageEnglish (US)
Pages (from-to)601-627
Number of pages27
JournalQuarterly Journal of Economics
Volume114
Issue number2
DOIs
StatePublished - Jan 1 1999

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Psychological factors
Stock options
Exercise
Employees
Stock prices
Psychological
Reference point
Stock returns
Economic factors

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

Heath, Chip ; Huddart, Steven J. ; Lang, Mark. / Psychological factors and stock option exercise. In: Quarterly Journal of Economics. 1999 ; Vol. 114, No. 2. pp. 601-627.
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Psychological factors and stock option exercise. / Heath, Chip; Huddart, Steven J.; Lang, Mark.

In: Quarterly Journal of Economics, Vol. 114, No. 2, 01.01.1999, p. 601-627.

Research output: Contribution to journalArticle

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