risk-free rate at the end of month t. Define Zmaxand Zminas the maxi-
mum and minimum values of Ztover the past 12 months. CMRA is
computed as:
6.VOLBT: Sensitivity of changes in trading volume to changes in aggre-
gate trading volume. This may be estimated by the following
regression:
where ∆Vi,tis the change in share volume of stock Ifrom week t– 1 to
week t, Ni,tis the average number of shares outstanding for stock Iat the
beginning of week t– 1 and week t, ∆VM,tis the change in volume on the
aggregate market from week t– 1 to week t, and NM,tis the average num-
ber of shares outstanding for the aggregate market at the beginning of
week t– 1 and week t.
7.SERDP: Serial dependence.This measure is designed to capture serial
dependence in residuals from the market model regressions. It is computed
as follows:
where etis the residual from the market model regression in month t, and
Tis the number of months over which this regression is run (typically, T=
60 months).
8.OPSTD: Option-implied standard deviation. This descriptor is com-
puted as the implied standard deviation from the Black-Scholes option
pricing formula using the price on the closest to at-the-money call option
that trades on the underlying stock.
SERDP=−++−++−−
=−−
=∑
∑
1
21
21223
2
12
223Tee eTee ett t
tTtt t
tT()()∆∆V
NabV
Nit
itMt
Mtit,
,,
,=++ξ,log max
min1 +
+
Z
aZ