The Chinese Warrants Bubble

Wei Xiong and Jialin Yu

American Economic Review, 2011, vol. 101, issue 6, 2723-53

Abstract: In 2005-2008, over a dozen put warrants traded in China went so deep out of the money that they were almost certain to expire worthless. Nonetheless, each warrant was traded more than three times each day at substantially inflated prices. This bubble is unique in that the underlying stock prices make warrant fundamentals publicly observable and that warrants have predetermined finite maturities. This sample allows us to examine a set of bubble theories. In particular, our analysis highlights the joint effects of short-sales constraints and heterogeneous beliefs in driving bubbles and confirms several key findings of the experimental bubble literature. (JEL G12, G13, O16, P34)

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (140)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.6.2723 (application/pdf)
http://www.aeaweb.org/aer/data/oct2011/20090465_data.zip dataset accompanying article (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: The Chinese Warrants Bubble (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:101:y:2011:i:6:p:2723-53

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().