卖空限制下我国权证价格偏离探析.doc

Are Investors Irrational?---Study on China Warrant Market Yintian Wang Yingzi Zhu Feb.2, 2013 Abstract: This paper studies Chinese warrant price deviation. By observing “asymmetric price error” phenomena, we propose that the rational hedging and speculation motivation is one important cause for warrant price deviations. Investors do not speculate irrationally under the resale motivation all the time, neither do they ignore warrants’ hedging function. Instead, investors would trade for hedging and speculation purpose and drive the warrant prices when the underlying assets are significantly undervalued or overvalued. The paper applies a model-free measure for warrant price deviation and verifies the proposal by studying five couples of warrants from 2006 to the beginning of 2008. It has been found that the rational hedging and speculation motivation dominates other trading motivation in the market. Key Words: Warrant bubble; hedging motivation; rational speculation; put-call parity JEL: G12，G32 I. Introduction Chinese derivatives market is still in an early stage of development. Research about derivative market focuses on warrant price bubbles. From 2006 to 2008, there was a significant deviation between the theoretical price and the market price in Chinese warrants market. Existing studies documented serious overvaluation of warrant prices relative to Black-Scholes model prices. For example, according to Xiong and Yu (2009), strike prices of 16 Chinese warrants are much lower than their underlying stock prices, so that theoretical prices by Black-Scholes formula should be close to zero. While those warrants are still actively traded at market prices much higher than zero. Powers, Xiao and Yan (2009) also find that all put warrants are overvalued relative to their Black-Scholes counterparts. Liu, Zhang and Zhao (2012) and Liao, Zhang and Zhu (2012) both confirmed the findings. There are mainly two explanations for Chinese warrants price deviation. The