The Impacts of Warrant Market on the Return, Volatility, Margin Trading and Day Trade of the Underlying Stocks
Date Issued
2015
Date
2015
Author(s)
Hung, Yung-Kai
Abstract
By using multiple regression analysis, this research attempts to look into the impacts of warrant market on the return, volatility, margin trading and day trade of the underlying stocks. We collected 480 samples for 21 seasons (first quarter 2010 to first quarter 2015) to investigate the impacts of warrants on underlying stocks market. Previously, researchers using event study to look into the impacts of the single warrants listing on the underlying stocks. However, the numbers of warrants listing would have certain influences on underlying stock markets. We determine stock equivalents of warrants exercised as an independent variable to accurately estimate the impacts of warrants. Because there is no reason to exercise warrants when the strike price is out-of-money, we would consider the delta of warrants. Empirical results show : (1) the call warrants factor has significant positive effect on stocks returns and the put warrants factor has significant negative effect on stocks returns. These phenomena are in line with the brokers’ warrants hedging actions. (2) the call warrants factor and the put warrants factor have significant influence on stock return volatility. (3) There is no crowding out effect between call warrants and margin purchase. The possible reason would be that there is different disparity age between call warrants investors and margin purchase investors. (4) There is no crowding out effect between put warrants and margin short. The possible reason would be that there is different disparity age between put warrants investors and margin short investors. (5) the call warrants factor and the put warrants factor have negative effect on stocks day trading. The possible reason may be that investors consider financial gearing more important investment strategy.
Subjects
Call Warrant
Put Warrant
Stock Return, Stock Return Volatility
Margin Purchase
Margin Short
Stock Day Trading
Type
thesis
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