The Effect of Taiwan Callable Bull-Bear Contracts Listing on the Return of the Underlying Stocks

• Main Authors: Ming-ru Wu, 吳明儒
• Other Authors: Yi-man Ho
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/47769852869665473487

碩士 === 國立屏東商業技術學院 === 財務金融系(所) === 101 === Callable bull-bear contracts (CBBC) is a new kind of warrant with special stop-loss mechanism. The underlying securities of CBBC include stocks, stock indices and ETFs etc. Taiwan callable bull-bear contracts were officially listed on July 8, 2011. This paper investigates the impact of the Taiwan CBBC listing on the underlying stocks from July 8, 2011 to December 31, 2012 by using event study analysis. Our sample is totally 63 CBBCs which include 43 callable bull contracts and 20 callable bear contracts. This paper respectively uses Market model and Fama-French three-factor model in computing abnormal returns. In Market model, ordinary least squares (OLS) and GARCH(1,1) model are used respectively. We use cross section t-test (parametric method) and sign test (nonparametric method) to test whether significant average abnormal returns and cumulative average abnormal returns of underlying stocks exist during the event period. Our results show that callable bull contracts listing have significant positive impact on the underlying stock returns on the sixth day after the event day. But callable bear contracts listing have significant negative impact on the underlying stock returns for some days before the event day. The CBBC contract is a new kind of warrant which is introduced for a short period of time. Investors may not have enough knowledge for them. That is why the CBBC listing does not have significant impact on the underlying stock returns.