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Calls of Warrants: Timing and Market Reaction
Author(s) -
SCHULTZ PAUL
Publication year - 1993
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1993.tb04733.x
Subject(s) - callable bond , convertible , financial economics , stock (firearms) , economics , monetary economics , stock price , bond , actuarial science , business , finance , history , engineering , paleontology , structural engineering , archaeology , series (stratigraphy) , biology
This paper examines the timing of, and reaction to, calls of callable warrants. Three main findings emerge. First, unlike convertible bonds or preferred stock, callable warrants are called almost as soon as possible. Second, there is a negative price reaction of about 3 percent when a call is announced. Finally, at the completion of a call, the stock price rebounds by an average of 7 percent. The total reaction from announcement through completion of the call is a positive excess return of about 4 percent.