Psychological factors and stock option exercise

Chip Heath, Steven Huddart, Mark Lang

Research output: Contribution to journalArticlepeer-review

289 Scopus citations


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
Issue number2
StatePublished - May 1999

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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