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    The information content of options data applied to the prediction of clinical trial results

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    YARGER-DISSERTATION.pdf (1.020Mb)
    Date
    2010-12
    Author
    Yarger, Stephen A., 1974-
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    Abstract
    FDA decisions and late-stage clinical trial results regarding new pharmaceutical approvals can cause extreme moves in the share price of small biopharmaceutical companies. Throughout the clinical trial process, many potential investors are exposed to market-moving information before such information is made available to the investing public. An investor who wished to profit from advance knowledge about clinical trial results may use the publicly traded options markets in order to increase leverage and maximize profits. This research examined options data surrounding the public release of information pertaining to the efficacy of clinical trials and approval decisions made by the FDA. Events were identified for small pharmaceutical companies with fewer than three currently approved drugs in an attempt to isolate the effect of individual clinical trial and FDA-related events on the share price of the underlying company. Option data were analyzed using logistic regression models in an attempt to predict phase II and III clinical trial outcome results and FDA new drug approval decisions. Implied volatility, open interest, and option contract delta values were the primary independent variables used to predict positive or negative event outcomes. The dichotomized version of a predictor variable designed to estimate total investment exposure incorporating open interest, option contract delta values, and the underlying stock price was a significant predictor of negative pharmaceutical related events. However, none of ii the variables examined in this research were significant predictors of positive drug research related events. The estimated total investment exposure variable used in this research can be applied to the prediction of future clinical trial and FDA decision related events when this predictor variable shows a negative signal. Additional research would help confirm this finding by increasing the sample size of events that potentially follow the same pattern as those examined in this research.
    Department
    Pharmacy
    Description
    text
    Subject
    Stock market options
    Clinical trials
    Food and Drug Administration
    FDA decisions
    Leading indicator
    predictive model
    Event prediction
    Insider trading
    Informed investor
    Drug research
    Drug trials
    New drug application
    Pharmaceuticals
    URI
    http://hdl.handle.net/2152/ETD-UT-2010-12-2058
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    University of Texas at Austin Libraries
    • facebook
    • twitter
    • instagram
    • youtube
    • CONTACT US
    • MAPS & DIRECTIONS
    • JOB OPPORTUNITIES
    • UT Austin Home
    • Emergency Information
    • Site Policies
    • Web Accessibility Policy
    • Web Privacy Policy
    • Adobe Reader
    Subscribe to our NewsletterGive to the Libraries

    © The University of Texas at Austin