scholarly journals Factors Affecting The Equity Price Impacts Of Convertible Bonds

2011 ◽  
Vol 8 (4) ◽  
pp. 79 ◽  
Author(s):  
Bruce R. Kohlman ◽  
Robert C. Radcliffe
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Convertible Bonds ◽  
Equity Returns ◽  
Convertible Bond ◽  
Factors Affecting ◽  
Price Impacts ◽  
Bond Issues ◽  
Abnormal Stock Returns ◽  
Equity Price

This study examines abnormal stock returns associated with both the date a convertible bond issue is announced and the date it is sold. Results suggest the negative stock price effects observed I this and previous studies are due to the equity component inherent in convertible bonds, and an easily observed measure of that equity component is offered. In addition, results suggest that convertible bond issues sold by firms with previously issued outstanding convertibles are met with larger negative abnormal equity returns.

Market Reactions to Announcements of Valuation Losses on Conversion Rights Embedded in Convertible Instruments

2020 ◽  
Vol 28 (1) ◽  
pp. 35-61
Author(s):  
Su Jeong Lee ◽  
Young Jun Kim ◽  
Eugenia Y. Lee ◽  
Ga-young Choi
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Stock Prices ◽  
Stock Price ◽  
Fair Value ◽  
Convertible Bonds ◽  
Market Reactions ◽  
Announcement Date ◽  
Abnormal Stock Returns ◽  
Trading Volumes

Convertible instruments are financial instruments embedded with conversion rights such as convertible bonds or convertible preferred stocks. Under the Korean International Financial Reporting Standards (K-IFRS), the embedded conversion rights with certain conditions (i.e., a refixing clause) are recognized as derivative liabilities and are recognized at fair value in issuer’s financial statements. Since the value of convertible rights varies with the underlying stock value, an increase in the issuers’ stock price causes the issuers of convertible instruments to announce large derivative valuation losses. Using disclosures under the title of ‘Loss from Derivatives Trading’ from the KOREA EXCHANGE (KRX) during January 2016 through December 2019, this study examines market reactions to the disclosure of valuation losses on conversion rights embedded in convertible instruments. We find the following results. First, abnormal stock returns on the loss announcement date are significantly negative. Second, abnormal trading volumes peak on the loss announcement date. Third, abnormal stock returns persist in the long-term. Collectively, our findings suggest that investors perceive the loss disclosures as negative news, but fail to impound the information into issuer’s stock prices effectively. This study emphasizes the importance of education on convertible instruments and improvement in the disclosure requirements on valuation losses of conversion rights embedded in convertible instruments by providing evidence that investors face difficulty in understanding the related disclosures.

Pricing Convertible Bond in Uncertain Financial Market

2021 ◽  
pp. 2150007
Author(s):  
Zhiqiang Zhang ◽  
Zhenfang Wang ◽  
Xiaowei Chen
Keyword(s):  
Differential Equation ◽  
Financial Market ◽  
Stock Price ◽  
Uncertainty Theory ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Uncertain Differential Equation ◽  
Numerical Examples ◽  
Liu Process ◽  
Uncertain Calculus

This paper is devoted to evaluating the convertible bonds within the framework of uncertainty theory. Under the assumption that the underlying stock price follows an uncertain differential equation driven by Liu process, the price formulas of convertible bonds and the callable convertible bonds are derived by using the method of uncertain calculus. Finally, two numerical examples are discussed.

The cost of presidential impeachment to politically connected firms

2019 ◽  
Vol 21 (2) ◽  
pp. 109-121
Author(s):  
Ha Na Lee ◽  
B. K. Song
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Constitutional Court ◽  
Korean History ◽  
South Korean ◽  
Price Data ◽  
Political Events ◽  
Abnormal Stock Returns ◽  
The Cost

AbstractThis study examines the ways political events can affect the stock prices of politically connected firms by studying one of the biggest corruption scandals in modern South Korean history, which led to the first-ever impeachment of a sitting president. We analyzed the stock returns of firms that donated money to foundations allegedly controlled by the president's confidante. We found that the abnormal stock returns of politically connected firms decreased when the president was removed from office. Using tick-by-tick stock price data, we were able to pinpoint the exact moments when the stock prices of firms that donated money fluctuated, as the president's fate was determined by the justices of the Constitutional Court.

scholarly journals Investor Protection, Equity Returns, and Financial Globalization

2009 ◽  
Vol 45 (1) ◽  
pp. 135-168 ◽  
Author(s):  
Mariassunta Giannetti ◽  
Yrjö Koskinen
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Investor Protection ◽  
Portfolio Allocation ◽  
Equity Returns ◽  
Expected Returns ◽  
Home Equity ◽  
Controlling Shareholders ◽  
Home Equity Bias ◽  
Allocation Decisions

AbstractWe study the effects of investor protection on stock returns and portfolio allocation decisions. In our theoretical model, if investor protection is weak, wealthy investors have an incentive to become controlling shareholders. In equilibrium, the stock price reflects the demand from both controlling shareholders and portfolio investors. Due to the high demand from controlling shareholders, the price of weak corporate governance stocks is not low enough to fully discount the extraction of private benefits. Thus, stocks have lower expected returns when investor protection is weak. This has implications for domestic and foreign investors’ stockholdings. In particular, we show that portfolio investors’ participation in the domestic stock market and home equity bias are positively related to investor protection and provide original evidence in their support.

scholarly journals A Simple and Precise Method for Pricing Convertible Bond with Credit Risk

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Probability Distribution ◽  
Credit Risk ◽  
Stock Price ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Financial Instruments ◽  
Market Prices ◽  
Precise Method ◽  
Large Movement ◽  
Arbitrage Strategy

This paper presents a new model for valuing hybrid defaultable financial instruments, such as, convertible bonds. In contrast to previous studies, the model relies on the probability distribution of a default jump rather than the default jump itself, as the default jump is usually inaccessible. As such, the model can back out the market prices of convertible bonds. A prevailing belief in the market is that convertible arbitrage is mainly due to convertible underpricing. Empirically, however, we do not find evidence supporting the underpricing hypothesis. Instead, we find that convertibles have relatively large positive gammas. As a typical convertible arbitrage strategy employs delta-neutral hedging, a large positive gamma can make the portfolio highly profitable, especially for a large movement in the underlying stock price.

scholarly journals PENGUJIAN ANOMALI PASAR (JANUARY EFFECT) DI BURSA EFEK INDONESIA

2019 ◽  
Vol 8 (9) ◽  
pp. 5571
Author(s):  
Ni Kadek Ema Yunita ◽  
Henny Rahyuda
Keyword(s):  
Stock Returns ◽  
Capital Market ◽  
Stock Price ◽  
Abnormal Return ◽  
Stock Exchange ◽  
Secondary Data ◽  
January Effect ◽  
Test Results ◽  
Average Return ◽  
Abnormal Stock Returns

The January effect is a phenomenon of deviation from the form of efficient capital markets, where the average return in January is higher than in other months. The purpose of this research is to find out whether there is a January effect on the IDX30 index group companies on the Indonesia Stock Exchange in the period February 2013 to January 2018. This study uses secondary data in the form of monthly stock price data used closing price on the Indonesia Stock Exchange. The sample used was 17 companies. The test results using the SPSS program is a t-test which shows that there is no difference in abnormal stock returns in January with months other than January. So, it can be concluded that the phenomenon of the January Effect does not occur in the Indonesian capital market. Keywords: january Effect, abnormal return, IDX30 Index

scholarly journals A Simple and Precise Method for Pricing Convertible Bond with Credit Risk

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Probability Distribution ◽  
Credit Risk ◽  
Stock Price ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Financial Instruments ◽  
Market Prices ◽  
Precise Method ◽  
Large Movement ◽  
Arbitrage Strategy

This paper presents a new model for valuing hybrid defaultable financial instruments, such as, convertible bonds. In contrast to previous studies, the model relies on the probability distribution of a default jump rather than the default jump itself, as the default jump is usually inaccessible. As such, the model can back out the market prices of convertible bonds. A prevailing belief in the market is that convertible arbitrage is mainly due to convertible underpricing. Empirically, however, we do not find evidence supporting the underpricing hypothesis. Instead, we find that convertibles have relatively large positive gammas. As a typical convertible arbitrage strategy employs delta-neutral hedging, a large positive gamma can make the portfolio highly profitable, especially for a large movement in the underlying stock price.

scholarly journals A Simple and Precise Method for Pricing Convertible Bond with Credit Risk

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Probability Distribution ◽  
Credit Risk ◽  
Stock Price ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Financial Instruments ◽  
Market Prices ◽  
Precise Method ◽  
Large Movement ◽  
Arbitrage Strategy

This paper presents a new model for valuing hybrid defaultable financial instruments, such as, convertible bonds. In contrast to previous studies, the model relies on the probability distribution of a default jump rather than the default jump itself, as the default jump is usually inaccessible. As such, the model can back out the market prices of convertible bonds. A prevailing belief in the market is that convertible arbitrage is mainly due to convertible underpricing. Empirically, however, we do not find evidence supporting the underpricing hypothesis. Instead, we find that convertibles have relatively large positive gammas. As a typical convertible arbitrage strategy employs delta-neutral hedging, a large positive gamma can make the portfolio highly profitable, especially for a large movement in the underlying stock price.

scholarly journals A Simple and Precise Method for Pricing Convertible Bond with Credit Risk

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Probability Distribution ◽  
Credit Risk ◽  
Stock Price ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Financial Instruments ◽  
Market Prices ◽  
Precise Method ◽  
Large Movement ◽  
Arbitrage Strategy

This paper presents a new model for valuing hybrid defaultable financial instruments, such as, convertible bonds. In contrast to previous studies, the model relies on the probability distribution of a default jump rather than the default jump itself, as the default jump is usually inaccessible. As such, the model can back out the market prices of convertible bonds. A prevailing belief in the market is that convertible arbitrage is mainly due to convertible underpricing. Empirically, however, we do not find evidence supporting the underpricing hypothesis. Instead, we find that convertibles have relatively large positive gammas. As a typical convertible arbitrage strategy employs delta-neutral hedging, a large positive gamma can make the portfolio highly profitable, especially for a large movement in the underlying stock price.

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