Price, volume and volatility effects associated with derivative warrant listing on the Singapore Exchange.
This paper examines the effect of the listing of derivative warrants on the price, volatility and liquidity of the underlying shares on Singapore Exchange (SGX) from January to September 2006. Our sample of 338 derivative warrants shows significant negative returns occurred for days prior to thei...
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| Main Authors: | , , |
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| Other Authors: | |
| Format: | Final Year Project |
| Published: |
2008
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10356/10473 |
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| Institution: | Nanyang Technological University |
| Summary: | This paper examines the effect of the listing of derivative warrants on the price,
volatility and liquidity of the underlying shares on Singapore Exchange (SGX) from
January to September 2006. Our sample of 338 derivative warrants shows significant
negative returns occurred for days prior to their listing dates. We postulate that this
evidence supports that the high gearing nature of derivative warrants causes investors
to unload their equity holdings and subsequently purchase derivative warrants to gain
similar exposure to the underlying shares. In addition, we found that there is excess
volatility prior to the listing of derivative warrants and this could be due to
speculation. While there is an increase in trading volume, which signifies additional
liquidity, bid-ask spread also significantly widened in the window period both prior to
and after the listing of the derivative warrants. This could be explained by additional
information asymmetry that caused the market makers to require additional
compensation for taking positions against more informed traders. |
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