Research On The Price Relation Between The Warrants Market And The Underlying Stocks Market In Mainland China

The listing and delisting effects of warrants and the price correlation between warrants and the Underlying stocks is a brand new question for study.Good answers for this question are important to distinguish the mutual correlation between these two markets and find out the directions information between these two markets is transmitted.These answers are also helpful for actual operations and pricing theories.This paper makes empirical studies on the warrants listing and delisting effects in mainland China by the event study,and investigates the mutual correlation between the warrants prices and the Underlying stocks prices in the duration of warrants by the Granger causality test.The main conclusions are as follows:(1) There is a conspicuous negative price effect on the Underlying stocks on the debut of equity warrants,and this negative price effect from the dilution effect tends to gradually strengthen over days in the short time;equity warrants produce a negative price effect on the Underlying stocks once their trading is terminated.(2) Derivative put warrants exert an outstanding positive price effect on the Underlying stocks on the seventh day after their debuts.Derivative put warrants bring about a positive price effect on the Underlying stocks before their exercise schedules,but when this effect reaches a maximum and ends is uncertain.(3) In mainland China,it is important that the day warrants end trading rather than the day warrants delist.(4) This paper' all empirical results from the event study don't support the following viewpoint from Chen Hanwen & Chen Xiangmin:Due to the differences between trading rules,the market model tends to reject null hypotheses in the researches on the mainland securities market.On the contrary,the mean-value model tends to reject null hypotheses in this paper.(5) In the duration of call warrants,the price behaviors of call warrants and their Underlying stocks are independent of each other.In the duration of put warrants,the price behaviors of the Underlying stocks are independent of those of warrants,but the price behaviors of warrants are significantly dependent of those of the Underlying stocks.