Convertible Bond Arbitrage, Happy Meals, and Insider Trading
Author | : Xiaoyang Li |
Publisher | : |
Total Pages | : 50 |
Release | : 2013 |
ISBN-10 | : OCLC:1309003747 |
ISBN-13 | : |
Rating | : 4/5 (47 Downloads) |
Book excerpt: Consistent with hedge funds trading on privileged information during the wall-crossing period, we document negative abnormal returns and abnormally high short selling in the trading days just prior to the private placements of U.S. convertible bonds, no pre-placement negative abnormal returns and less pre-placement abnormal short selling volume for convert issuers who engage in related stock buybacks, and more pre-placement short selling for convert issues subject to more intense post-issue short selling. Alternative explanations for our results are rejected because pre-placement anomalies are related to specific terms of the converts and related buybacks. Short interest disclosure needs to be more transparent and Regulation Fair Disclosure better enforced.