Clientele Effects and Cross-Security Market Making: Evidence from Calls of Convertible Preferred Securities
研究可转换优先证券强制赎回公告前后的交易活动、买卖价差和套利机会，发现被赎回证券换手率上升、买卖价差下降，流动性改善源于跨证券套利机会。
We examine trading activity, bid-ask spreads, and potential arbitrage opportunities for market makers in the period around conversion-forcing calls of convertible preferred securities. We find an increased turnover in the called convertible preferred stock, which is consistent with a clientele effect. We also find a decrease in the average bid-ask spread of the called convertible preferred and the underlying common stock. This suggests increased liquidity in the post-announcement period. We argue that the liquidity improvement is a consequence of profitable cross-security trading opportunities.