Empirical Analysis On The Impact Of Warrants Listing On The Underlying Stocks

Along with the process of equity division reform,stock warrants were back again and caused widespread concern . The introduction of warrants is not only a compensation program for investors to allow non-tradable shares in circulation,but also a try to the innovation of financial tools which will help the development of derivative financial products markets.As a finance derivative,the listing of warrants would influence the underlying assets.With event study method this research aims to discuss and prove the effects of warrants listing on underlying stocks .After introducing factors affecting the value of warrant and the development of warrant market both in China and abroad,this study selects 27 stocks with warrants listed on the SHSE and SZSE as of 30th may in 2007 as sample,compares the price,return,trading volume,volatility of underlying stocks 15 days before and after the warrants listing generally and then analyzes stocks grouped by the type of listing warrants,explains the market response to the event,and estimate the effects of the listing of warrants.The empirical results indicate that peak value of Cumulative Abnormal Return occurs before the Warrant listing,and then falls before the second listing day;the trading volume and volatility of stocks increases after warrant listing.Group study finds that Cumulative Abnormal Return of stocks rises before covered warrants listing,and has a fall effects before equity warrants listing;Cumulative Abnormal Return of Stocks rises before puttable warrants listing, and has a fall effects before callable warrants listing,but for butterfly warrants,there's no consistent conclusion statistically;Cumulative Abnormal Return of Stocks shared the same trend according to warrant listing on both SHSE and SZSE.