Skip to main content
SpringerLink
Log in

The impact of warrants introduction: Sign effect or magnitude effect?

  • Published:
Journal of Systems Science and Complexity Aims and scope Submit manuscript

Abstract

The data of warrants underlying stocks was selected for the sample period from August, 2005 to December, 2009. These data the authors collected did not include the announcement date of reform of non-tradable underlying shares, and was available from Shanghai and Shenzhen stock exchanges. The event study method is employed to test the magnitude effect based on the Wild bootstrap, which is performed on the abnormal return, the cumulative abnormal return, and the standardized cumulative abnormal return. Empirical results show no evidence of magnitude effect but sign effect after warrants introduction. The authors argue that this phenomenon is caused by the migration of radical agents from stock market to warrant market.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. Black F and Scholes M S, The pricing of options and corporate liabilities, Journal of Political Economy, 1973, 81: 637–654.

    Article  Google Scholar 

  2. Ross S A, Options and efficiency, Quarterly Journal of Economics, 1976, 90: 75–89.

    Article  MATH  Google Scholar 

  3. Hakansson N H, Changes in the financial market: welfare and price effects and the basic theorems of value conservation, Journal of Finance, 1982, 37: 977–1004.

    Article  Google Scholar 

  4. Detemple J and Jorion P, Option listing and stock returns: An empirical analysis, Journal of Banking and Finance, 1990, 14: 781–801.

    Article  Google Scholar 

  5. Detemple J and Selden L, A general equilibrium analysis of option and stock market interactions, International Economic Review, 1991, 32: 279–303.

    Article  MathSciNet  MATH  Google Scholar 

  6. Conrad J, The price effect of option introduction, Journal of Finance, 1989, 44: 487–499.

    Article  Google Scholar 

  7. Detemple J, Financial innovation, values and volatilities when markets are incomplete, The Geneva Papers on Risk and Insurance Theory, 1990, 15: 47–53.

    Article  Google Scholar 

  8. Sorescu S M, The effect of options on stock prices: 1973 to 1995, The Journal of Finance, 2000, 55: 487–514.

    Article  Google Scholar 

  9. Zhang A L and Wu C F, Impact of warrant introduction on trade behavior of underlying stocks, Journal of Industrial Engineering/Engineering Management, 2008, 22(4): 137–139(In Chinese).

    Google Scholar 

  10. Hu Z P, The impact of warrants listing to the underlying stocks: The analysis and evidence from the stock market in China, Journal of Financial Research, 2008, 331(1): 100–118(In Chinese).

    Google Scholar 

  11. Campbell J Y, Lo A W, and MacKinlay C A, The Econometrics of Financial Markets, Princeton University Press, Princeton, 1997.

    MATH  Google Scholar 

  12. Marais M L, An application of the bootstrap method to the analysis of squared, standardized market model prediction errors, Journal of Accounting Research, 1984, 22: 34–54.

    Article  Google Scholar 

  13. Brown S and Warner J, Using daily stock returns, Journal of Financial Economics, 1985, 14: 3–31.

    Article  Google Scholar 

  14. Davidson R and MacKinnon G J, Econometric Theory and Methods, Oxford University Press, New York, 2003.

    Google Scholar 

  15. Godfrey L G, Tests of non-nested regression models some results on small sample behavior and the bootstrap, Journal of Econometrics, 1998, 84: 59–74.

    Article  MathSciNet  MATH  Google Scholar 

  16. Beran R, Prepivoting test statistics: A bootstrap view of asymptotic refinements, Journal of the American Statistical Association, 1988, 83: 687–697.

    Article  MathSciNet  MATH  Google Scholar 

  17. Davidson R and MacKinnon G J, Bootstrap J tests of nonnested linear regression models, Journal of Econometrics, 2002, 109: 167–193.

    Article  MathSciNet  MATH  Google Scholar 

  18. MacKinnon G J, Bootstrap hypothesis testing, Queen’s Economics Department Working, http://www.econ.queensu.ca/faculty/mackinnon/, 2009.

    Google Scholar 

  19. Cowan A R, Nonparametric event study tests, Review of Quantitative Finance and Accounting, 1992, 2: 343–358.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of Finance, Anhui University of Finance and Economics, Bengbu, 233030, China

    Hailin Zhou, Xinyu Wu & Zhongming Ding

  2. School of Banking and Finance, University of Business and Economics, Beijing, 100029, China

    Haibin Xie

  3. MADIS, Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China

    Shouyang Wang

Authors
  1. Hailin Zhou
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Haibin Xie
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Xinyu Wu
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Zhongming Ding
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Shouyang Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Hailin Zhou.

Additional information

This paper is supported by the National Nature Science Foundation of China under Grant No. 71101001 and the National Nature Science Foundation of China and the Research Grants Council of Hong Kong under Grant No. 70731160635.

This paper was recommended for publication by Editor DAI Yuhong.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Zhou, H., Xie, H., Wu, X. et al. The impact of warrants introduction: Sign effect or magnitude effect?. J Syst Sci Complex 26, 419–431 (2013). https://doi.org/10.1007/s11424-013-0095-z

Download citation

  • Received:

  • Revised:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11424-013-0095-z

Keywords

Search

Navigation