Stock Performance following Seasoned Stock-Warrant Unit Offerings

Theories suggest that stock-warrant units are used as mechanisms for reducing agency costs or signaling as a form of sequential equity financing. While there is evidence of less severe price reaction to unit offering announcements, unit offering firms underperform not only nonissuing matching firms but also similar share offering firms. The same results are found when the long-run performance is measured relative to broad market indexes or measured by the three-factor or four-factor model. These findings are not consistent with the theories suggested for the roles of unit financing.

Expectations Hypothesis of the Term Structure of Implied Volatility: Re-examination

Previous studies have tested the expectations hypothesis of the term structure of implied volatility using xed-interval time-series of at-the-money options. We show, using a stochastic volatility option pricing model, that even the implied volatilities of at-the-money options are not necessarily unbiased and that the xed-interval time-series can produce misleading results. We then suggest an alternative approach and test the expectations hypothesis using S&P 500 stock index options. Our results do not support the expectations hypothesis: long-term volatilities rise relative to short-term volatilities but the increases are not matched as predicted by the expectations hypothesis. In addition, an increase in the current long-term volatility relative to the current short-term volatility is followed by a subsequent decline.published or submitted for publicationnot peer reviewe