Like many a successful scientist before him, University of Iowa economics professor Erik Lie was looking for something else entirely when he made his most famous discovery.
Lie was attempting to determine whether generous stock option grants made executives less risk-averse — to the point where they were willing to bet more aggressively on the company’s upside in hopes of cashing in their option “chips.” What he found instead was a striking pattern of option grants being placed at the very bottom of a stock chart dip.
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