138th Seminar on Finance and Accounting

Topic: New Investors and Bubbles: An Analysis of the Baosteel Call Warrant Bubble

 

PresenterDeng Pan,Associate Professor in Economics, Fudan University

 

Time: March 25, 2011(Friday)3:00—4:30PM

 

Venue: Room 501, Jiageng Bld 2

 

Chair:Jun Ruan, assistant professor in finance, IFAS

 

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Abstract:

 

This paper provides an empirical analysis of the trading behavior of new investors in the bubble of the Baosteel call warrant, the first derivative in China after a nine years suspension.First, we find that the heterogeneity across investors, which is suggested to play an important role in forming bubbles by many theoretical and empirical studies, mainly came from new investors.Second, echoing common wisdom, we empirically prove that the entries of new investors sustained the bubble.Third, we attribute the slow drop of the warrant price as the maturity approached to new investors who perceived the relative low price as cheap.

 

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