Our Separate Convertible Bond Warrant Arbitrage Empirical Research On The Impact Of The Underlying Stock

The warrant market of mainland of China came through the bull market in 2007 and got a extremely swift development since it opened again in 2005 reform of non-tradable shares, the volume of the warrant market had surpassed the mature covered warrant market of HongKong in less than two years. Besides rapid development, warrant market of mainland of China also exposes many problems, short-term speculation prevails, low pricing efficiency, unreasonable warrant issuance. Research in warrant market is not only good for the investor to be a rational investor but also good for the warrant healthy development of market which will promote further financial innovation.This article studies the warrant market after reform of non-tradable shares base on local and foreign scholar's studies, takes 18 warrants bonds as the sample which released in mainland of China from the end of 2005 to October 2008, uses the event study method analysis the arbitration of warrant bonds impact the sample from the price,volume,volatility. The empirical results prove that the impact of the warrant issuing day on the underlying stocks abnormal return is insignificant, but the date of record is significant, this is different with the older article. The empirical results prove that warrant bonds issue impact the abnormal return on the underlying stock is not because of issue effect but the arbitration of warrant bonds issue. This article also points out that it is because of warrant trade system results in arbitrated profit. In the end of the article gives some advices to improve on our warrant market underlying problem in our market nowadays and the empirical results.