The purpose of this study was to determine whether the warrant prices of Shariah-compliant companies differed much in illiquid market as compared to liquid market at a certain date. Ten Shariah-compliant company warrants listed under Bursa Malaysia were selected from the lists provided by Securities Commission of Malaysia (SCM) for five years from August 2011 to August 2016. The stock prices of the warrants selected were evaluated using stochastic supply curve under both liquid and illiquid conditions. Simple linear regression was applied to obtain significant estimated liquidity parameter for the supply curve. The estimated liquidity parameter obtained was then used to evaluate the stock prices in illiquid market. The stock prices for a liquid market were calculated by taking the liquidity parameter to be 0. The evaluated stock prices and calculated expected return as average returns of stocks were inserted into Ukhov's Black Scholes model with dilution effect to evaluate warrant prices in both illiquid and liquid markets. This study found that the differences between the evaluated warrant prices in illiquid and liquid markets were very small. This implies that the evaluated warrant prices between the two markets seemed not to have much difference. This gives strong indication that illiquid market does not affect much the warrant prices of the Shariah-compliant companies listed in Bursa Malaysia. We hope this study will convince investors to consider Shariah-compliant company warrants as their choice in investments since their prices do not differ much during good or bad economic conditions.
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