The Impact of Derivative Warrants Introductions on the Underlying Stocks：Evidence from Taiwan

[[abstract]]This paper investigates the impact of derivative warrant introductionon the return, risk and trading activity of the underlying assets. Theresult shows that the impact of derivative warrant introductions havemany distinguish features that differ from that of standard options.We found a positive abnormal return at the announcement day, which ismore significant for stocks that are successively issued within twomonths, but the returns decrease after the issuance day. There is apost-issue under-performance of underlying stocks. The results showthat investment bankers have good market timing and that investor haveoptimistic expectation regarding future earnings. Our evidence isconsistent with that financial institutions take advantage of windowsof opportunity by issuing warrants on overvalued equity. We also findthat investment banks tend to issue warrants on stocks which have arecent increase in volatility. The empirical results demonstrate thattrading volume, systematic risk, and liquidity are not affected, whilethe variances of the underlying assets decrease after warrantsintroduced.[[sponsorship]]逢甲大學財務金融系; 靜宜大學財務金融系; 東海大學財務金融系[[conferencetype]]國內[[conferencedate]]20011123~20011123[[booktype]]紙本[[iscallforpapers]]Y[[conferencelocation]]臺中, 臺