Abstract
We examine trading activity, bid-ask spreads, and potential arbitrage opportunities for market makers in the period around conversion-forcing calls of convertible preferred securities. We find an increased turnover in the called convertible preferred stock, which is consistent with a clientele effect. We also find a decrease in the average bid-ask spread of the called convertible preferred and the underlying common stock. This suggests increased liquidity in the post-announcement period. We argue that the liquidity improvement is a consequence of profitable cross-security trading opportunities.
Original language | English |
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Pages (from-to) | 41-52 |
Number of pages | 12 |
Journal | Financial Management |
Volume | 27 |
Issue number | 4 |
DOIs | |
Publication status | Published - 1 Jan 1998 |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics