Tournament theory provides important insights into organizational reward systems. It examines the incentive properties of reward systems based on rank‐order rather than absolute individual performance. Tournament theory may explain the pattern of managerial pay. It may also explain...

This study tests whether investor belief differences affect the cross-sectional variation of risk-neutral skewness, using data on firm-level stock options traded on the CBOE from 2003 to 2006. Using well known proxies for heterogeneous beliefs, we find that stocks with greater belief differences...