Research On Value Deviation Of Convertible Bonds And Its Influencing Factors

With the continuous developm ent of Chinesecapital market,there are more and more new financing tools co ming out. Especially these years, Chinese stock m arket went up and down several tim es, which made convertible bonds be favored by m ore and more investors in the previou s decade. So it is s ignificant to do research on convertible bonds right now.In the m arket, the most important problem is pricing convertible bonds. How to price convertible bonds accurately is a big issue for researchers. There have been a lot of achievements about the issue, m ostly concentrated in discovery and innovation of the pricing models,and thus foundout the phenomenon of deviation of the theoretical value and market value both in Chinese convertible bonds market and foreign m arket, but different direction of deviation by different researches. Value deviation means that there are arbitrage opp ortunities in the market, and investors can get profit though appropriate strategies.In this view, this paper aims at discovering the value devi ationof Chinese conve rtible bonds issue market to put forward suggestions for investors and market regulators.In this paper, we summarize the researches on pricing models and deviation of market value and theoretical price firstly. Then we analyze the terms of the convertible bonds and characteristics of Chinese co nvertible bonds m arket, choose Tsiveriotis&Fernandes(1998) m odel and us ebinary tree calculation m ethod at the same time to calculate102 convertible bonds’ theoretical price onthe issue announcement day. The calculation results s how that convertible bonds’ issue prices are generally lower thantheoretical price on the issue announcem ent day. Compared with the closing price on the first day of the listing,we found that the issue prices of convertible bonds are generally lower than the first day’ s closing prices, and the closing prices on th e first day are mostly lower than the theoretical prices. The phenomenon means that the issue pricing efficiency and market pricing efficiency are both low.In order to explore the reasons, we put forwar d the hypothesis of the deviation of the issue price and market price and the deviation of the market price and theoretical price, establish regression models based on the relevant theories.Regression results show that th e investor group dif ferences, liquidity differences, the company’s operating conditions, market index and other factors can influence the underpricing rate of the issueand market. Then we put forward suggestions for market regulators to improve the market system and investors to make good choices.