• DocumentCode
    3038664
  • Title

    Warrant Pricing Bias in China´s Stock Market and Its Causes

  • Author

    Li, Yue ; Wang, Xiangning

  • Author_Institution
    Dept. of Stat. & Finance, Univ. of Sci. & Technol. of China, Hefei, China
  • fYear
    2009
  • fDate
    24-26 July 2009
  • Firstpage
    321
  • Lastpage
    324
  • Abstract
    In this paper we study the characteristics of warrant prices and their formation in China´s stock market. We use Hull-White option pricing model (H-W model) to investigate the characteristics of warrant prices, and then adopt the behavior finance theories to study the formation of these characteristics. Our study results show that: all sample warrants have great pricing biases; out-of-the-money warrants are overpriced while in-the-money warrants are underpriced; overpricing of the out-of-the-money call warrant becomes more serious along with the underlying stock price falling; the investors´ overconfidence and their overrating of the probabilities of low-probability events are two main causes of these phenomena.
  • Keywords
    pricing; stock markets; China stock market; Hull-White option pricing model; behavior finance theories; in-the-money warrants; low-probability events; out-of-the-money warrants; stock price falling; warrant pricing; Economic indicators; Finance; Linear regression; Pricing; Statistics; Stochastic processes; Stock markets; Tin; EGARCH; H-W model; overconfidence; prospect theory; warrant;
  • fLanguage
    English
  • Publisher
    ieee
  • Conference_Titel
    Business Intelligence and Financial Engineering, 2009. BIFE '09. International Conference on
  • Conference_Location
    Beijing
  • Print_ISBN
    978-0-7695-3705-4
  • Type

    conf

  • DOI
    10.1109/BIFE.2009.80
  • Filename
    5208877