Arbeitspapier

Is there Really a When-Issued Premium?

We use a unique set of equities in the when-issued market to provide new tests of the law of one price in financial markets. We compare the prices of when-issued and regular-way shares of publicly-traded subsidiaries and their parents around the time the subsidiaries are fully divested. In contrast to prior analyses of when-issued trading in equity markets, we find that the when-issued shares of the subsidiary trade at a discount. Some of the pricing differences stem from measurement factors such as exchange location and bid-ask clustering that bias the observed when-issued pricing differential away from zero. The remaining difference between the when-issued and regular-way prices is due to asymmetric movements in bid and ask quotes in the two markets. We also find evidence of temporary price pressures on the date of execution of the spinoff of the subsidiary firms that bear resemblance to the pricing in the when-issued market. We interpret the evidence as consistent with the law of one price in the presence of transaction costs.

Sprache
Englisch

Erschienen in
Series: Claremont Colleges Working Papers in Economics ; No. 2001-34

Klassifikation
Wirtschaft
Thema
Law of One Price
Market Efficiency
Market Microstructure

Ereignis
Geistige Schöpfung
(wer)
Ezzell, John R.
Miles, James A.
Mulherin, J. Harold
Ereignis
Veröffentlichung
(wer)
Claremont McKenna College, Department of Economics
(wo)
Claremont, CA
(wann)
2001

Handle
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Ezzell, John R.
  • Miles, James A.
  • Mulherin, J. Harold
  • Claremont McKenna College, Department of Economics

Entstanden

  • 2001

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