The Empirical Analysis Of Effects Of Listing Of Chinese Call Warrants On The Underlying Stocks

Since coming back to the security market, warrants are studied by many researchers. But the focus of such studies is the comparison of the market prices and the theoretical prices. The studies of the effects of warrants on the underlying stocks are relatively little. This paper attempts to discuss the effects of listing of call warrants on the underlying stocks.The first part of this paper introduces the basic knowledge of warrants and the variables affecting warrant price, and development of warrants outside and inside of country. In the second part, the paper introduces literature reviews of the effects of warrants on the underlying stocks. Then, it analyses the short-run and long-run effects of listing of Chinese call warrants on the underlying stocks. Finally, my paper comes to the conclusion: the listing of call warrants affects the underlying stocks both from the point of short run and long run.The creations mainly are the followings: firstly, when we discuss the effects of listing of the call warrants, we analyzing the volatility of the underlying stocks. Secondly, when we analyzing the long-run effect, we not only study the values of Beta but also the correlations of the underlying volatility and the volatility of market indices. Thirdly, when we build the GARCH models, we introduce the dummy variables into both the mean equations and the variance equations, by which we are able to discuss the change of the means and the variances before and after listing of the call warrants.