The Relationship Investigation Between Warrant Market And Its Underlying Assets

In August of 2005, warrant products returned to the domestic market after a nine years absence. So do the listing and trading of warrants affect the spot matrket and what are the affections, and how do the two markets affect each other? All these are what we want to investitgate.In this paper, we investigate the asymmetric information effect and volatility spillover effect between the trading volume of warrants and their underlying spots through a bivariate GARCH model. At first, we classify the volatility of trading volume into the expected part and the unexpected part with an ARIMA model. Then we divide the unexpected volatility into positive and negative threshold effects by zero. At last we add them all into the conditional mean equations of the bivariate GARCH, in order to test the asymmetric information relationship. At the same time, we use the form of the BEEK model as the conditional variance equations of the GARCH model to investigate the volatility spillover relationship.The empirical study shows that the spot (warrant) market is affected not only by its own previous information impact, but also by previous expected information impact and unexpectedly good and bad information impact of the warrant (spot) market. When the information reaches the stock market, it will cause trading volume volatility which will lead to stock price volatility. At the same time, the warrant market will respond to the volatility with tradingvolume fluctuating, and then the price fluctuates, which will in turn affect the stock market, though the influence is weaker.The results also show that there are indeed significant asymmetric information effect and bidirectional volume volatility spillover effect with asymmetry which presents that the impact from warrant market to spot market is less significant than the impact from spot market to warrant market, which can be explained that it may be related to the trading system of security market. The stock market implements through trading system of T+1, while what the warrant market implements is T+0, so investors of warrants can more quickly and more timely adjust their investment strategies and change their positions in facing the volatility from the stock market. At last we give some reasonable explanations for this phenomena and provide some suggestions.