Information Asymmetry in Warrants and their Underlying Stocks on the Stock Exchange of Thailand
This paper examines the informational role of warrants based on the unique order data from the Stock Exchange of Thailand, where both warrants and stocks are traded under the same market structure and where warrants are as liquid as stocks. The estimated probability of informed trading (PIN) in warrants is found to be statistically higher than their underlying stocks regardless of order submission type and order size. The PIN explains a substantial portion of the cross-sectional variation in the opening spread beyond trading volume and minimum tick size. We find evidence that a signed warrant trade contains information about the future stock price and that warrants with a higher PIN have greater predictive powers.
Probability of informed trading (PIN), Warrants, Information asymmetry, Price discovery, Thailand
Finance and Financial Management
Journal of Empirical Finance
Visaltanachoti, N.; Charoenwong, C.; and DING, David K..
Information Asymmetry in Warrants and their Underlying Stocks on the Stock Exchange of Thailand. (2011). Journal of Empirical Finance. 18, (3), 474-487. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/3597
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