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Crash of '87: Was It Expected? The Evidence from Options Markets

Version
v0
Resource Type
Dataset : survey data
Creator
  • Bates, David S. (University of Pennsylvania. Wharton School)
Other Title
  • Archival Version (Subtitle)
Publication Date
1999-04-30
Funding Reference
  • National Science Foundation
Language
English
Free Keywords
economic conditions; stock market conditions; stock market crashes; stock markets
Description
  • Abstract

    Efforts to explain why stock markets worldwide crashed in October 1987 have been frustrated by the scarcity of major economic developments occurring around that time that could have precipitated the crashes. It is conceivable that the United States stock market crashed because it was expected to crash. To test this hypothesis, transaction prices of Standard and Poor's 500 futures options over the 1985-1987 period were examined for evidence prior to October 1987 of expectations of an impending crash. It was found that out-of-the-money puts became unusually expensive during the year leading up to the crash. A model was therefore derived for pricing American options on jump-diffusion processes with systematic jump risk. The jump-diffusion parameters implicit in option prices indicate that a crash was expected and that implicit distributions were negatively skewed for the October 1986-August 1987 period. Neither approach, however, points to any strong crash fears in the two months prior to the crash.
  • Table of Contents

    Datasets:

    • DS1: Dataset
Temporal Coverage
  • 1985 / 1987
    Time period: 1985--1987
Geographic Coverage
  • United States
Collection Mode
  • The files are SP8501.DAT-SP8712.DAT, SPLINE85.DAT-SPLINE87.DAT, SPNOON.PRN, SKEWPREM.PRN, SPPARAM.PRN, SPCP.PRN, and SPTEST.PRN. There are readme files from the original diskettes that describe the contents of the data files.

    These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator(s) if further information is desired.

Availability
Delivery
This version of the study is no longer available on the web. If you need to acquire this version of the data, you have to contact ICPSR User Support (help@icpsr.umich.edu).
Alternative Identifiers
  • 1187 (Type: ICPSR Study Number)
Relations
  • Is previous version of
    DOI: 10.3886/ICPSR01187.v1
Publications
  • Bates, David S.. The crash of '87: Was it expected?. Journal of Finance.46, (3), 1009-1044.1991.
    • ID: http://www.jstor.org/stable/2328552 (URL)

Update Metadata: 2015-08-05 | Issue Number: 6 | Registration Date: 2015-06-15

Bates, David S. (1999): Crash of '87: Was It Expected? The Evidence from Options Markets. Archival Version. Version: v0. ICPSR - Interuniversity Consortium for Political and Social Research. Dataset. https://doi.org/10.3886/ICPSR01187