HOLDRs, a type of basket security, enable investors to purchase an entire industry sector with one transaction. We examine the link between HOLDR basket securities and the underlying stocks. Contrary to the findings of studies using other basket securities, with HOLDRs we find that the price of the portfolio of underlying securities is more informative than and leads the HOLDR (basket) price. Our results are the first empirical confirmation of Subrahmanyam's (1991) theoretical model of the interaction of the redundant security with its underlying assets.
|Publication status||Published - 2005|
|Event||Financial Management Association International Meeting - Chicago, United States|
Duration: 11 Oct 2005 → 14 Oct 2005
|Conference||Financial Management Association International Meeting|
|Period||11/10/05 → 14/10/05|
Henker, T., & Martens, M. (2005). Price discovery in HOLDR security baskets and the underlying stocks. Paper presented at Financial Management Association International Meeting, Chicago, United States. https://doi.org/10.2139/ssrn.924520