Disposition, Confidence, and Profits and Losses: Evidence from the Taiwan Warrant Markets

10.6186/IJIMS.202303_34(1).0002

Matthew C. Chang；Jui-Cheng Hung；Rebecca Chung-Fern Wu

Warrant Markets ； Warrant Characteristics ； Confidence ； Disposition ； Profits and Losses ； Investor Types

International Journal of Information and Management Sciences

34卷1期（2023 / 03 / 01）

23 - 50

英文

In this paper, we first examine the extent that a warrant's characteristics, i.e., size of the underlying stock, effective leverage, time value, and implied volatility, affect behavioral measures, i.e., coefficients of disposition and coefficients of confidence, of two types of investors, i.e., individual investors and dealers, in the Taiwan warrant markets. Second, we explore the impacts of coefficients of disposition and coefficients of confidence on profits and losses (PL) by separate groups of investors. Finally, we find that cross-market spillover effects on levels of disposition coefficients and levels of confidence of individual investors from spot markets are especially important to contribute to PL of individual investors and dealers. Accordingly, our novel discoveries shed some light on better understanding of investors' behavioral biases.

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