Price discovery in HOLDR security baskets and the underlying stocks

Thomas Henker; Martin Martens

doi:10.2139/ssrn.924520

Price discovery in HOLDR security baskets and the underlying stocks

Thomas Henker, Martin Martens

Bond Business School

Research output: Contribution to conference › Paper › Research

Abstract

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.

Original language	English
DOIs	https://doi.org/10.2139/ssrn.924520
Publication status	Published - 2005
Event	Financial Management Association International Meeting - Chicago, United States Duration: 11 Oct 2005 → 14 Oct 2005

Conference

Conference	Financial Management Association International Meeting
Abbreviated title	FMA
Country/Territory	United States
City	Chicago
Period	11/10/05 → 14/10/05

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title = "Price discovery in HOLDR security baskets and the underlying stocks",

abstract = "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.",

author = "Thomas Henker and Martin Martens",

year = "2005",

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AU - Henker, Thomas

AU - Martens, Martin

PY - 2005

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N2 - 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.

AB - 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.

U2 - 10.2139/ssrn.924520

DO - 10.2139/ssrn.924520

M3 - Paper

T2 - Financial Management Association International Meeting

Y2 - 11 October 2005 through 14 October 2005

ER -

Price discovery in HOLDR security baskets and the underlying stocks

Abstract

Conference

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