This study selects ten call warrants on electronics stocks and utilizes the bivariate GARCH model to investigate the influence of return and expected and unexpected trading volume on the call warrants and underlying stocks. The results reveal that stocks and call warrants are correlated and function as leading factors for each other. The volatilities of underlying stock returns are positively influenced by the expected and unexpected trading volumes of the underlying stocks. The influence of expected and unexpected trading volumes of warrants on the volatility of target stock returns is also positively correlated. Expected and unexpected trading volumes of warrants as well as underlying stocks show a positive correlation with the return volatility of warrants.
Quarterly Journal of Business and Economics 44(1-2), pp.29-43