Informational Content of Warrant Trading Prior to Interim Monthly‐Revenue Report: Evidence From the Taiwan Warrant Market
研究台湾权证市场在月度营收报告前的交易信息含量，发现权证的隐含波动率偏斜能预测公告后的股票回报，且这种预测力在股价高时更强。
ABSTRACT Taiwan‐listed companies are required to report unaudited net operating revenues monthly. This study examines the information content of trading in the short‐sale‐prohibited domestic warrant market before the interim accounting disclosures by adopting an implied volatility skew (IV skew) as a proxy for informed trading. We find a significantly negative relationship between the pre‐announcement abnormal IV skew of warrants and cumulative abnormal stock return around monthly‐revenue disclosures. The results of the placebo test further suggest that the return predictability of the IV skew is not prevalent in normal periods, but only the pre‐announcement IV skew possesses predictive power toward future stock returns. Furthermore, the predictability of warrants' IV skew on monthly‐revenue announcement return is stronger when the underlying stocks are priced high and weaker when some information about unpublished revenues has been reflected by pre‐announcement stock returns. These findings suggest that informed trading is the driving force behind warrant market activities before monthly‐revenue reporting.