Title

The market premium for the option to close: Evidence from Australian gold mining firms

Date of this Version

12-21-2015

Document Type

Journal Article

Publication Details

Citation only

Kelly, S. (2015, online). The market premium for the option to close: Evidence from Australian gold mining firms. Accounting & Finance.

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2015 HERDC submission

© Copyright, 2015 AFAANZ

ISSN

1467-629X

Abstract

This study shows the market value of gold mining firms contains a premium for the option to close. The sample uses 41 gold mining producers listed on the Australian Stock Exchange from 1987 to 2013. The premium of the market price over the present value of cash flows is isolated and a pooled cross-sectional regression tests the degree of association between that premium and theoretical option premiums. The results show market prices incorporate a premium reflecting the option to temporarily close operations. The magnitude of the option premium to close depends on whether firms are out or in the money options.

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This document has been peer reviewed.