| Summary: | 碩士 === 國立中央大學 === 財務金融學系 === 101 === This paper examines whether investors engage in the arbitrage activities of the convertible bonds and their underlying stocks. The sample covers the convertible bonds issued in the period from January 2007 to December 2011. I observe the abnormal returns and the excess short selling volume in three windows: the announcement day, the pricing date, and the issuing day of the convertible bonds. All convertible bonds are classified three groups based on the issuing premium. The empirical results show that stock prices have a significant run-up before and run-down after the pricing day. Moreover, we find that short selling volume increases around the announcement, pricing, and issuing days. The lower premium is associated with a higher increase in short selling volumes, suggesting that investors would engage in the arbitrage activities when firms issue the convertible bonds.
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