Brent Donnelly is a senior risk-taker and FX market maker, and has been trading foreign exchange sin
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Regarding the chart in the appendix section titled The Impact of CEO Turnover on Equity Volatility, if you look carefully at the chart x-axis you’ll see that T-0, the event date, is in the middle (not the extreme left as may be assumed), as such, the chart in fact suggests that company volatility increases on average in the run-up to the CEO change, peaks around the time of the change, and then gradually decreases over the following two years, at which point it has fully reverted to the same level as the control population. I would suggest that the chart does not imply that “CEO changes increase stock volatility” - what the chart shows is that CEO changes happen when the stock is already more volatile than is typical, and this excess volatility persists for 24 months on average.
(I would also be suspicious of the odd looking artefact in the chart for the control population, showing a drop in vol at that +26 month point)
Agree on all points, Tom.
Yes great point thanks Tom. Probably efficient market with some news leaking out early (Erin Callan rumors were swirling well before she got fired) … and information accruing to insiders or connected people as well.