Topic: Speculation Spillover
Presenter：Longkai Zhao，Assistant Professor of Finance，Guanghua School of Management，Peking University
Time: November 27, 2009（Friday）3:00-4:30PM
Venue: Room 513, Jiageng Bld 2
Abstract：
This paper investigates the volatility and turnover effect of underlying stocks associated with the introduction of warrants in China's warrants market. We find that a derivative market where noise traders dominate, the introduction of warrants increases the underlying stock's volatility and turnover, which cannot be attributed to better information revelation or hedging needs. We also find that speculation on derivatives has a spillover effect on the underlying security. Higher volatility and higher turnover of underlying stocks are associated with higher unexpected warrants turnover and larger warrants price deviation from theoretical prices. Our paper provides new evidence for the impact of derivatives on underlying assets in the emerging market context.
Presenter Introduction：
Dr. Zhao Longkai got his bachelor degree in Economics from Tsinghua University, M.Sc. from National University of Singapore, and Ph.D. from University of British Columbia. His research interests include theoretical and empirical corporate finance, investment, asset pricing and derivatives.
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