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A simple The following annually recorded variable will be part of our measure would be:
OC Estimated value of in-the-money unexercised exercisable options($) VUEEstimated value of in-the-money unexercised unexercisable options($) VUUValue realized on option exercise($) VE For each period <math> t </math>, let <math> OC_t^i = \sum_frac{VE}{VE + VUE}</math> to be the preliminary measure of overconfidence of CEO <math> i </math> in period <math>t </math>. I was also wondering if there would be any justification for including the variable VUU in the denominator. Note that for each CEO we'd have multiple observations for different time periods. Thus, let the <math> 2xOC^2 + i </math> to be the mean of all the observations for CEO <math> i </math>
Malmendier & Tate CEO Overconfidence (view source)
Revision as of 15:43, 19 September 2016
, 15:43, 19 September 2016→Our Malmendier type measure
We will come up with a measure to rank all the CEOs based on their option exercise behavior. This measure should first replicate some of the features of the overconfidence measure suggested by Malmendier and Tate. It should also exhibit sufficient variation in our sample of CEOs. After we have successfully ranked CEOs, we simply identify the top x percentile as overconfident.
