Abstract

http://ssrn.com/abstract=1546355
 
 

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Empirical Test of the Efficiency of UK Covered Warrants Market: Stochastic Dominance and Likelihood Ratio Test Approach


Zhuo Qiao


University of Macau

Christian De Peretti


affiliation not provided to SSRN

Chia-Ying Chan


Yuan-Ze University - Department of Finance

Wing-Keung Wong


Hong Kong Baptist University (HKBU)

February 2, 2010


Abstract:     
This paper first examines the efficiency of the UK covered warrants market by adopting a stochastic dominance (SD) approach to examine market efficiency. Our empirical analyses reveal that neither covered warrants nor the underlying shares stochastically dominate each other, which implies that the UK covered warrants market is efficient. To complement the SD results, the likelihood ratio (LR) test statistic is also employed to evaluate market efficiency, which also offers consistent results. The empirical evidence serves as a reference for market participants who are interested in covered warrants and also contributes to the growing body of academic knowledge on this new financial instrument.

Number of Pages in PDF File: 45

Keywords: Stochastic dominance, Market efficiency, Covered warrants, Bootstrap

JEL Classification: C14, G11, G14, G15

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Date posted: February 3, 2010  

Suggested Citation

Qiao, Zhuo and de Peretti, Christian and Chan, Chia-Ying and Wong, Wing-Keung, Empirical Test of the Efficiency of UK Covered Warrants Market: Stochastic Dominance and Likelihood Ratio Test Approach (February 2, 2010). Available at SSRN: http://ssrn.com/abstract=1546355 or http://dx.doi.org/10.2139/ssrn.1546355

Contact Information

Zhuo Qiao
University of Macau ( email )
P.O. Box 3001
Macau
Christian De Peretti
affiliation not provided to SSRN
Chia-Ying Chan
Yuan-Ze University - Department of Finance ( email )
320 Chungli
Taiwan
Wing-Keung Wong (Contact Author)
Hong Kong Baptist University (HKBU) ( email )
Kowloon
Hong Kong
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