Test of Informed Trader Migration in Emerging Market: Case Study of Warrant Introduction in Thai Market (in English)
Higher leverage opportunity is hypothesized to be the main factor that induces informed traders to migrate from stock market into derivative market. This paper tests the informed trader migration hypothesis by using a new approach suggested by Easley, OHara, and Srinivas (1998). The empirical test is conduced on the introduction of warrant in Thai market. The result is in support of informed trader migration since trading volume in warrant can predict change in stock price. It should be noted that the buy volume of warrant can rapidly transfer information from warrant into stock price faster than the sell volume. The short sell restriction might prohibit informed trader who does not possess warrant warrant to transfer bad news into the market via warrant selling.
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