The Impact Of Convertible Bond Arbitrage Activity On Stock Market Quality

As a kind of derivatives, The paper researches convertible bonds is very important for investors and enterprises. As a convertible bonds holder, he can choose to keep the bond and ask the issuing company to pay interest and captical back or to convert the bond to the underlying stock to gain the dividend. Convertible bonds combine the characteristics of stock and bonds. The have low risk and high return. Recently, convertible bonds market developed quickly in our country.The main aim of the paper is analyzing the impact of convertible bond arbitrage activity on stock market liquidity and efficiency. The papar is one the basis of the analysis of convertible bond arbitrage activity. First part introduces the convertible bond arbitrage activity and examine the feasibility of convertible bond arbitrage activity on underlying equity markets. Then I create a proxy for the presence of convertible bond arbitrageurs in the market for the stock. In the Second part, on the basis of literatures, I summarize the proxies for the presence of stock market liquidity and efficiency. Then I chooe the appropriate proxies and analyse the change of stock market liquidity and efficiency after issuance of convertible bond. The result of this part show that the change of the liquidity proxies is significant in the pre-issue period and the date of issue, the change is also significant in the date of issue and the date of after issue. The result demonstrates that the company have great impact on the liquidity of stock, but the influence is in the short term. The another tesult show that the change of the efficiency proxies is not significant in the pre-issue period and the date of issue, the change is not significant in the date of issue and the date of after issue, too. Otherwise, the change is significant in, the date of pre-issue and the date of after issue. In the third part, I introduce the theory about the convertible bond arbitrage activity, the stock market liquidity and efficiency. On the basis of datum, I research the impact of convertible bond arbitrage activity on stock market liquidity and efficiency. The results show that after the issuance of convertible bonds, convertible arbitrage arbitrage behavior of those who can improve the issuing company's stock liquidity, while the efficiency of the impact of stock issuance was not significant. In the last part, I summarize the research and afford gist for investors and enterprises. For the research approaches, I apply the analyzing of variance, signed-rank test and multiple regression, then, I apply the SPSS of the statistical software to deal with datum.How to find the proxies for the presence of convertible bond arbitrageurs, the stock market liquidity and efficiency is a difficulty of this paper. How to find the credible methodes for examinng the impact of convertible bond arbitrage activity on stock market liquidity and efficiency. For dealing with these difficulties, I summarize the lectures and consider the characteristic of datum, then I find the proxies for the presence of convertible bond arbitrageurs, the stock market liquidity and efficiency. For finding the credible methodes, I analyse the different methodes.