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monsmatglad
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Hi. I am currently studying the market for equity options and the use of these to predict stock return around company earnings announcements. The dependent variable in my regression analyses have been the relative change in stock price or log-return from the day before the announcement to closing price on announcement day. However, would it be reasonable to instead/also run regressions using the logarithm of the closing price itself as the dependent variable. Then the independent variables would still show if they have a tendency to pull the price up or down on the day of the earnings announcement, although there would be no data involved actually showing relative change. Running a few short tests, shows that the log-alternative provides more significant relations and a greater R^2 than when using the relative change as the dependent variable. Am I completely mistaken?
Mons
Mons