Stock price distributions and news: evidence from index options

James M. Steeley

Research output: Contribution to journalArticlepeer-review


We estimate the shape of the distribution of stock prices using data from options on the underlying asset, and test whether this distribution is distorted in a systematic manner each time a particular news event occurs. In particular we look at the response of the FTSE100 index to market wide announcements of key macroeconomic indicators and policy variables. We show that the whole distribution of stock prices can be distorted on an event day. The shift in distributional shape happens whether the event is characterized as an announcement occurrence or as a measured surprise. We find that larger surprises have proportionately greater impact, and that higher moments are more sensitive to events however characterised.

Original languageEnglish
Pages (from-to)229-250
Number of pages22
JournalReview of quantitative finance and accounting
Issue number3
Publication statusPublished - Nov 2004

Bibliographical note

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  • implied density functions
  • index options
  • macroeconomic news


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