This study tests the hypothesis that common stock call options are exercised rationally and in accordance with the commonly used frictionless markets boundary conditions. Using two years of historical early exercise data for common stock call options, the results show that contrary to the frictionless markets boundary conditions, approximately 20 percent of the early call exercise occurs at times other than ex-dividend dates. While most of the non-dividend related early exercise may be explained by transactions costs, a significant number of contracts appear to be exercised irrationally. These results suggest that failure to incorporate market frictions in option pricing models is likely to lead to specification error.