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The Impact of Warrant Introduction: The Australian Experience


  • Michael Clarke

    (School of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, Victoria, 3125, Australia)

  • Gerard Gannon

    () (School of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, Victoria, 3125, Australia)

  • Russell Vinning

    (School of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, Victoria, 3125, Australia)


The main purpose of this paper is to examine the impact that the introduction of exchange traded derivative warrants has on the underlying securities' price, volume and volatility in the Australian market. The impact that derivative trading has on the underlying security is essential to our understanding of security market behaviour and important in the fields of market efficiency and pricing of derivatives. The major findings of significant negative abnormal returns, reduction in skewness, no change in beta and small changes in variance are consistent with recent research findings in the US, UK and Hong Kong. However, the findings of derivative warrant listing resulting in decreased trading volume is in contrast with most prior research in the field. The results of this research, showing a negative price impact, decreased volume and no change in risk, and other recent empirical findings such as Mayhew and Mihov (2000) or Faff and Hillier (2003), indicate a requirement for further development of the theoretical frameworks.

Suggested Citation

  • Michael Clarke & Gerard Gannon & Russell Vinning, 2011. "The Impact of Warrant Introduction: The Australian Experience," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 14(02), pages 213-269.
  • Handle: RePEc:wsi:rpbfmp:v:14:y:2011:i:02:n:s021909151100224x
    DOI: 10.1142/S021909151100224X

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    References listed on IDEAS

    1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
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    6. Stewart Mayhew & Vassil Mihov, 2000. "Another Look at Option Listing Effects," Finance 0004002, University Library of Munich, Germany.
    7. William Bertin & Paul Fowler & David Michayluk & Laurie Prather, 2010. "An analysis of Australian exchange traded options and warrants," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 34(2), pages 150-172, April.
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    Cited by:

    1. Leonard L. Lundstrum, 2016. "Option listing: market quality revisited," Review of Quantitative Finance and Accounting, Springer, vol. 47(3), pages 565-578, October.

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    More about this item


    Derivatives; warrants; market efficiency; event study;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance


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