Showing papers on "Stock exchange published in 1997"
Posted Content•
TL;DR: In this paper, the authors examined the value effects of improvements in the trading mechanism of the Tel Aviv Stock Exchange and found positive liquidity externalities (spillovers) across related stocks, and improvements in value discovery process due to the improved trading method.
Abstract: This paper examines the value effects of improvements in the trading mechanism. Stocks on the Tel Aviv Stock Exchange were transferred gradually from a daily call auction to a mechanism where the call auction was followed by iterated continuous trading sessions. This event was associated with a positive and permanent price appreciation. The cumulative average market-adjusted return over a period that started five days prior to the announcement and ended 30 days after the stocks started trading by the new method was approximately 5.5%. In addition, we find positive liquidity externalities (spillovers) across related stocks, and improvements in the value discovery process due to the improved trading method. Finally, there was a positive association between liquidity gains and price appreciation. Our results suggest that improvements in market microstructure are valuable.
517 citations
TL;DR: In this paper, the authors investigated the relationship between exchange rates and stock prices in the emerging financial markets of India, Korea, Pakistan and the Philippines, and found unidirectional causality from exchange rates to stock prices.
Abstract: Interactions are investigated between exchange rates and stock prices in the emerging financial markets of India, Korea, Pakistan and the Philippines. The motivation is to establish the causal linkages between leading prices in the foreign exchange market and the stock market; the linkages have implications for the ongoing attempts to develop stock markets in emerging economies simultaneously with a policy shift towards independently floating exchange rates. Some recent econometric techniques are applied to a bivariate vector autoregressive model using monthly observations on the IFC stock price index and the real effective exchange rate over 1985:01–1994:07. The results show unidirectional causality from exchange rates to stock prices in all the sample countries, except the Philippines. This finding has policy implications; it suggests that respective governments should be cautious in their implementation of exchange rate policies, given that such policies have ramifications on their stock markets.
501 citations
TL;DR: In this paper, the authors present a model of the stock market in which managers have discretion in making investments and must be given the right incentives; and traders may have important information that managers do not have about the value of prospective investment opportunities.
Abstract: In a capitalist economy, prices serve to equilibrate supply and demand for goods and services, continually changing to reallocate resources to their most efficient uses. However, secondary stock market prices, often viewed as the most "informationally efficient" prices in the economy, have no direct role in the allocation of equity capital since managers have discretion in determining the level of investment. What is the link between stock price informational efficiency and economic efficiency? We present a model of the stock market in which: (i) managers have discretion in making investments and must be given the right incentives; and (ii) stock market traders may have important information that managers do not have about the value of prospective investment opportunities. In equilibrium, information in stock prices will guide investment decisions because managers will be compensated based on informative stock prices in the future. The stock market indirectly guides investment by transferring two kinds of information: information about investment opportunities and information about managers' past decisions. However, because this role is only indirect, the link between price efficiency and economic efficiency is tenuous. We show that stock price efficiency is not sufficient for economic efficiency by showing that the model may have another equilibrium in which prices are strong-form efficient, but investment decisions are suboptimal. We also suggest that stock market efficiency is not necessary for investment efficiency by considering a banking system that can serve as an alternative institution for the efficient allocation of investment resources. IN A CAPITALIST SOCIETY, prices for goods and service play the central role in resource allocation. The strength of capitalism lies in its ability to make these prices reflect essential information so that resources are deployed efficiently. Consider a fishmonger whose prices for different kinds of fish change every day in response to availability. These prices have a direct effect on the behavior of customers entering the shop: if the price is high they may choose to eat beef for dinner instead. In other words, the allocation of fish to the most efficient uses (in this case, to the people with the highest marginal utility of fish consumption) is accomplished by price changes. These price changes directly regulate the use of the fish. Now consider the equity capital market and its relation to the allocation of funds for capital investment. If a company's share price goes
444 citations
TL;DR: In this paper, the authors examined the value effects of improvements in the trading mechanism of the Tel Aviv Stock Exchange and found positive liquidity externalities across related stocks, and improved in the value discovery process due to the improved trading method.
433 citations
TL;DR: In this article, a simple model suggests that idiosyncratic risk, firm size, and visibility of the firm affect the optimal relative tick size and thus the share price, and when stock prices rise above a country's usual trading range, firms often split their stocks to restore prices to that range.
Abstract: Minimum price variation rules help explain why stock prices vary substantially across countries, and other curiosities of share prices. Companies tend to split their stock so that the institutionally mandated minimum tick size is optimal relative to the stock price. A large relative tick size provides an incentive for dealers to make markets and for investors to provide liquidity by placing limit orders, despite its placing a high floor on the quoted bid-ask spread. A simple model suggests that idiosyncratic risk, firm size, and visibility of the firm affect the optimal relative tick size and thus the share price. IN STOCK MARKETS AROUND the world, the average price per share differs substantially. The median U.S. stock, for example, sells for about $40; a typical London stock sells for about ?5 ($7.50); and a typical Hong Kong share is about $2. Furthermore, when stock prices rise above a country's usual trading range, firms often split their stocks to restore prices to that range. Why are these price ranges so different among countries? These trading ranges can be remarkably stable over time. During the half century from 1943 to 1994, the S&P Composite Index increased over 1,500 percent, yet the average New York Stock Exchange (NYSE) share price was
420 citations
Book•
01 Jan 1997
TL;DR: In this paper, the Milken drama cycles of opportunism - profits, prudence and the public interest - are interpreted as a way to cope with the threat of extinction opportunism and innovation.
Abstract: Introduction - market makers on Wall Street homo economicus unbound - bond traders on Wall Street structured anarchy - formal and informal organization in the futures market taming the market - conflict resolution among market makers responding to external threats homo economicus restrained - identity and control at the New York stock exchange coping with the threat of extinction opportunism and innovation an interpretation of the Milken drama cycles of opportunism - profits, prudence and the public interest.
372 citations
TL;DR: In this article, the authors extend the debate on the relative efficiency of bank and stock market-centered capital markets by developing a further systematic difference between the two systems: the greater vitality of venture capital in stock market centered systems.
Abstract: The United States has many banks that are small relative to large corporations and play a limited role in corporate governance, and a well developed stock market with an associated market for corporate control. In contrast, Japanese and German banks are fewer in number but larger in relative size and are said to play a central governance role. Neither country has an active market for corporate control. We extend the debate on the relative efficiency of bank- and stock market-centered capital markets by developing a further systematic difference between the two systems: the greater vitality of venture capital in stock market-centered systems. Understanding the link between the stock market and the venture capital market requires understanding the contractual arrangements between entrepreneurs and venture capital providers; especially the importance of the opportunity to enter into an implicit contract over control, which gives a successful entrepreneur the option to reacquire control from the venture capitalist by using an initial public offering as the means by which the venture capitalist exits from a portfolio investment. We also extend the literature on venture capital contracting by offering an explanation for two central characteristics of the U.S. venture capital market: relatively rapid exit by venture capital providers from investments in portfolio companies; and the common practice of exit through an initial public offering.
353 citations
TL;DR: In this article, the authors examine execution costs for trades in NYSE issues completed on the NYSE, the NASD dealer market, and the regional stock exchanges during 1994 and find that effective bid-ask spreads are only slightly smaller at the New York Stock Exchange than off-the-shelf market makers.
295 citations
TL;DR: In this paper, the authors examined the relationship among stock prices in eighteen national stock markets by using unit root and cointegration tests for the period 1961-92 and found that the world equity markets are weak-form efficient.
Abstract: This study examines the relationships among stock prices in eighteen national stock markets by using unit root and cointegration tests for the period 1961--92 All the markets were analyzed individually and collectively in regions to test for market efficiency The results from unit root tests suggest that the world equity markets are weak-form efficient The cointegration test results show that there are only a small number of significant cointegrating vectors over the last three decades However, the number of significant cointegrating vectors increases after the October 1987 stock market crash, a result that is consistent with the contagion effect
291 citations
TL;DR: In this article, the authors re-examine the empirical relationship between stock markets and economic growth and find no hard evidence that the level of stock market activity helps to explain growth in per capita output.
285 citations
TL;DR: The authors empirically examined the liquidity premium predicted by the Amihud and Mendelson (1986) model using Nasdaq data over the 1973-1990 period and found that the results support the model and are much stronger than for the New York Stock Exchange (NYSE), as reported by Chen and Kan (1989) and Eleswarapu and Reinganum (1993).
Abstract: This article empirically examines the liquidity premium predicted by the Amihud and Mendelson (1986) model using Nasdaq data over the 1973-1990 period. The results support the model and are much stronger than for the New York Stock Exchange (NYSE), as reported by Chen and Kan (1989) and Eleswarapu and Reinganum (1993). I conjecture that the stronger evidence on the Nasdaq is due to the dealers' inside spreads on the Nasdaq being a better proxy for the actual cost of transacting than the quoted spreads on the NYSE, since the Nasdaq dealers do not face competition from limit orders or floor traders. THIS ARTICLE EMPIRICALLY EXAMINES the equilibrium relation between the cost of transacting (demanding liquidity) and expected returns using data for Nasdaq stocks. Amihud and Mendelson (1986) (hereafter A&M) in a theoretical model show that investors need to be compensated with higher returns for holding stocks with larger bid-ask spreads. Although intuitively appealing, the empirical support has been weak in studies involving New York Stock Exchange (NYSE) data.' Chen and Kan (1989) and Eleswarapu and Reinganum (1993) find that the initial empirical findings of Amihud and Mendelson (1986, 1989) are affected by their restrictive data selection criterion and methodology. In particular, Chen and Kan (1989) criticize the use of the pooled cross-section and time series regressions. Instead, they advocate the use of Fama and Macbeth (1973) type cross-sectional regressions. They show that overall the liquidity premium is not statistically distinguishable from zero with such a design. In addition, Eleswarapu and Reinganum (hereafter E&R) argue that the A&M criterion of requiring eleven complete years of data induces a selection bias. With the use of a modified sample selection, they find that liquidity is priced only in the January months. There are several reasons why examining the relation between the cost of transacting and expected returns using the Nasdaq stock market data is of interest. First, there are likely differences in the accuracy with which the
TL;DR: In this paper, the authors compare execution costs on the New York Stock Exchange (NYSE) and Nasdaq for institutional investors and find that costs for trading the larger stocks are lower on the Nasdaq market than on the NYSE.
Abstract: We compare execution costs (market impact plus commission) on the New York Stock Exchange (NYSE) and Nasdaq for institutional investors. The differences in cost generally conform to each market's area of specialization. Controlling for firm size, trade size, and the money management firm's identity, costs are lower on Nasdaq for trades in comparatively smaller firms, while costs for trading the larger stocks are lower on NYSE. The cost differences estimated from a regression model are, however, sensitive to the choice of time period. THE MECHANISMS FOR TRADING stocks have undergone dramatic changes in recent years. In the traditional floor-based trading system, as exemplified by the New York Stock Exchange (NYSE), all trades in a stock are centrally processed by a specialist. More recent screen-based systems (such as the Nasdaq system) feature several market-makers for each stock. Proponents of the multiple dealership system on Nasdaq argue that competition among dealers lowers trading costs for investors. There is nonetheless a widespread popular perception that investors' trading costs are in fact higher on the Nasdaq market. This perception is, for instance, provocatively described in a recent article in Forbes, where a trader is quoted as remarking that "in the over-the-counter market, the competition is between the dealers and the customer" (Morgenson (1993)). The available scientific evidence on differences in trading cost between the NYSE and Nasdaq, based on a wide range of methodologies and samples, generally finds that on Nasdaq the bid-ask spreads are wider. Price improvement, the ability to execute at better than the posted quotes, also appears to be more limited on Nasdaq.1
TL;DR: This article examined the impact of 1975 Congressional mandate to integrate the trading of NYSE-listed stocks and concluded that most of the time, the New York Stock Exchange (NYSE) quote matches or determines the best displayed quote, and the NYSE is the most frequent initiator of quote changes.
Abstract: The goal of this article is to examine the impact of 1975 Congressional mandate to integrate the trading of NYSE-listed stocks. The conclusions are: most of the time, the New York Stock Exchange (NYSE) quote matches or determines the best displayed quote, and the NYSE is the most frequent initiator of quote changes. Non-NYSE markets attract a significant portion of their volume when they are posting inferior bids or offers, indicating they obtain order flow for other reasons, such as “payment for order flow.” Yet, when a non-NYSE market does post a better bid or offer, it does attract additional order flow.
TL;DR: In this paper, the authors examined the relationship between holding periods and bid-ask spreads and found that the relationship was stronger on Nasdaq stocks than on the NYSE stocks, where spreads are larger, and concluded that investors with longer investment time horizons hold common stocks with higher bidask spreads.
Abstract: Amihud and Mendelson (1986) and Constantinides (1986) provide a theoretical basis for the proposition that assets with higher transactions costs are held by investors for longer holding periods, and vice versa. We examine average holding periods and bid-ask spreads for Nasdaq stocks from 1983 through 1991 and for New York Stock Exchange (NYSE) stocks from 1975 through 1989 and find strong evidence that, as predicted, the length of investors' holding periods is related to bid-ask spreads. We also find that the relation between holding periods and bid-ask spreads is much stronger on Nasdaq, where spreads are larger, than on the NYSE, where spreads are smaller. EARLY ARTICLES BY Harold Demsetz (1968) and Jack Treynor, writing under the pseudonym Walter Bagehot (1971), examine the importance of transactions costs and, in particular, the bid-ask spread, for investment decisions. These seminal papers gave rise to much research regarding the determinants of the bid-ask spread,1 the size of bid-ask spreads in various markets,2 the role of bid-ask spreads in explaining so-called stock market anomalies,3 and the effect of bid-ask spreads on returns from common stocks.4 Several of the latter studies also suggest that the bid-ask spread causes a clientele effect. That is, it affects the frequency with which investors trade securities and causes investors with longer (shorter) expected holding periods to hold the assets with the higher (lower) transactions costs. This study investigates whether investors with longer (shorter) investment time horizons hold common stocks with higher (lower) bid-ask spreads. Amihud and Mendelson (1986) examine the effect of bid-ask spreads on investors' holding periods and present a formal proof of their Proposition I, which states, "Assets with higher spreads are allocated in equilibrium to portfolios with (the same or) longer expected holding periods" (p. 228). That is,
TL;DR: In this article, the authors developed and empirically tested a disclosure model for the fifty Czech joint-stock companies that were included in the 1993 Prague Stock Exchange Index, and the results provided initial insights into Czech managements' choices concerning financial reporting and suggest topics for additional research.
Abstract: The paper1develops and empirically tests a disclosure model for the fifty Czech joint-stock companies that were included in the 1993 Prague Stock Exchange Index. Independent variables are drawn from prior theoretical and empirical research concerning voluntary disclosure. Dependent variables are based on Czech laws and regulations concerning financial disclosures. Univariate analyses generally support the existence of the hypothesized relationships between extent of disclosure in annual reports and firm size, profitability performance, financial risk, and monitoring variables. Multivariate regressions explain about 25% of the variance in the extent of disclosure in annual reports. Statistically significant variables in the multiple regressions include type of auditor, number of employees, stock exchange listing status, and return on equity performance. The results provide initial insights into Czech managements' choices concerning financial reporting and suggest topics for additional research
TL;DR: In this article, the authors studied long-run stock returns and the operating performance of 180 initial public offerings (IPOs) listed on the Tokyo Stock Exchange during the 1971-1992 period.
Abstract: This paper studies long-run stock returns and the operating performance of 180 initial public offerings (IPOs) listed on the Tokyo Stock Exchange during the 1971–1992 period. The aftermarket downward drift is not only confirmed but also found to be large in magnitude relative to a number of benchmarks. In contrast to evidence from the US, the post-issue deterioration in operating performance cannot be attributed to the reduced managerial ownership. This provides strong support for the ‘windows of opportunity’ explanation for the new issue puzzle by Loughran and Ritter (1995, 1996).
TL;DR: In this paper, the authors show that the early years of the Turkish stock exchange were characterized by non-linear behaviour and inefficient pricing, and that regulatory changes encouraged participation, improved information quality and led to prices impounding information more rapidly.
Abstract: Emerging markets efficiency has been widely investigated, with mixed results. However such evidence is only reliable if the methodology adopted accounts for the institutional features of the market. Unlike previous studies this paper corrects for thin trading and incorporates possible non-linear behaviour and regulatory changes. Using Istanbul Stock Exchange data we show that in its early years the exchange was characterised by non-linear behaviour and inefficient pricing. However, regulatory changes encouraged participation, improved information quality and led to prices impounding information more rapidly, suggesting markets become efficient with high trading volume, reliable information and an appropriate institutional framework.
TL;DR: In this article, the authors compared the bid-ask spread for New York Stock Exchange (NYSE)-listed securities before and after a major third market broker-dealer, Bernard L Madoff Investment Securities (Madoff), begins to selectively purchase and execute orders in those securities.
Abstract: This article compares the bid-ask spread for New York Stock Exchange (NYSE)-listed securities before and after a major third market broker-dealer, Bernard L Madoff Investment Securities (Madoff), begins to selectively purchase and execute orders in those securities Tests reveal the quoted bid-ask spread tightens when Madoff enters the market Furthermore, trading costs as measured by the difference between the transaction price and the midpoint of the contemporaneous bid-ask spread do not increase Together, these results suggest that the adverse selection problem associated with allowing agents to selectively execute orders in exchange-listed securities may be economically insignificant
TL;DR: In this paper, the authors address the "decimalization" debate, i.e., whether trading on cent ticks rather than fractions of a dollar reduces trading costs without diminishing liquidity.
TL;DR: In this paper, a prototype model of stock market is introduced and studied numerically, in which traders trade according to their own strategy, to accumulate their assets by speculating on the price's fluctuations which are produced by themselves.
Abstract: A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate their assets by speculating on the price's fluctuations which are produced by themselves. The model reproduced rather realistic price histories whose statistical properties are also similar to those observed in real markets.
TL;DR: The authors provides a competitive theory of clustering that emphasizes the effect of uncertainty, the size of transactions, volatility, and the informational and transactional roles of stock quotations on the degree of stock clustering.
Abstract: Economists, financial commentators, regulatory agencies, and the legal community have recently criticized the Nasdaq Stock Market, Inc., because there is greater clustering of stock quotations on even‐eighths on Nasdaq than on the New York Stock Exchange or the American Stock Exchange, a phenomenon which critics attribute to collusion or some other defect in Nasdaq market structure. However, as this article demonstrates, clustering occurs in varying degrees in many other incontestably competitive financial markets, including the NYSE, the AMEX, the London Stock Exchange, the London gold market, and the international foreign exchange market. This article provides a competitive theory of clustering that emphasizes the effect of uncertainty, the size of transactions, volatility, and the informational and transactional roles of quotations on the degree of clustering. In addition, the article examines how market structure can affect the degree of clustering and considers the relation between clustering, spread...
TL;DR: In this paper, a prototype model of stock market is introduced and studied numerically, in which traders trade according to their own strategy, to accumulate their assets by speculating on the price's fluctuations which are produced by themselves.
Abstract: A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate his assets by speculating on the price's fluctuations which are produced by themselves. The model reproduced rather realistic price histories whose statistical properties are also similar to those observed in real markets.
TL;DR: This paper investigated the economically and statistically significant positive correlation between monthly foreign purchases of Mexican stocks and Mexican stock returns and found that a 1 percent of market capitalization surprise foreign inflow is associated with a 13 percent increase in Mexican stock prices.
Abstract: We investigate the economically and statistically significant positive correlation between monthly foreign purchases of Mexican stocks and Mexican stock returns. We find that a 1 percent of market capitalization surprise foreign inflow is associated with a 13 percent increase in Mexican stock prices. We explore whether this correlation might be explained by permanent reductions in conditional expected returns resulting from expansion of the investor base along the lines modeled by Merton (1987), or correlations with other factors causing returns, price pressures, or positive feedback strategies by foreign investors, and conclude that the available evidence is consistent with the base-broadening hypothesis.
TL;DR: The authors empirically demonstrate that the opportunities the Boston Stock Exchange and the Cincinnati Stock Exchange offer members to take the other side of their customers' orders through affiliated market makers (to internalize orders) have little short run effect on posted or effective bid-ask spreads.
Abstract: We empirically demonstrate that the opportunities the Boston Stock Exchange and the Cincinnati Stock Exchange offer members to take the other side of their customers' orders through affiliated market makers (to internalize orders) have little short-run effect on posted or effective bid-ask spreads. This is true despite substantial movement of order flow away from the New York Stock Exchange when trading under one of these regional stock exchange programs begins. These results contrast with the adverse effects of market fragmentation and internalization predicted by some theoretical market microstructure analyses and the popular financial press. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
TL;DR: In this article, the authors study the quality of executions and the profitability of market making for internalized, preferenced and non-preferenced order flow on the London Stock Exchange for the FTSE-100 stocks (these are the most liquid stocks on the exchange).
Abstract: The practices of preferencing, internalization, and best execution have been criticized as causing worse execution in dealership markets like NASDAQ relative to auction style markets like the NYSE. We study the quality of executions and the profitability of market making for internalized, preferenced and non-preferenced order flow on the London Stock Exchange for the FTSE-100 stocks (these are the most liquid stocks on the exchange). Our data allow us to identify the broker who initiates and the market maker who executes each trade. Our results indicate that order flow executed by market makers not posting the best quotes (preferenced order flow) receives worse execution relative to non-preferenced order flow while the order flow routed by a broker to a dealer belonging to the same firm (internalized order flow) receives better execution compared to the rest of the order flow. Although preferenced order flow is associated with higher spreads, dealers executing a larger proportion of preferenced order flow do not seem to be make significantly higher trading profits. In addition, we find that the dealers make overall profits that are not statistically different from zero. These results are contrary to the predictions of the `collusion' hypothesis and the `quotes are free options' hypothesis. However, they are consistent with the hypothesis that there are costs of negotiating quotes and that customers have relationships with dealers. We also find evidence that dealers make money on small and large trades but lose money on medium sized trades which is consistent with the `stealth trading' hypothesis. Finally, cross-sectionally in our sample, we do not find any relationship between either the inside spread or the effective spread in a stock and the extent of preferencing or internalization in that stock.
TL;DR: In this article, the authors examined the predictive ability of two types of trading rule, the moving average oscillator and trading range break-out, in the London StockExchange by analysing daily data on the FT30 index for the period 1935-1994.
Abstract: SUMMARY After many years of being held in almost completecontempt by academics, technical analysis hasenjoyed somewhat of a renaissance recently in theeyes of both practitioners and financial econometri-cians. The latter’s interest has been rekindled by thefact that technical trading rules require some form ofnonlinearity in prices to be successful—and non-linearity is being increasingly found in financialtimeseries—and by empirical studies which find thattrading rules can outperform statistical models inpredicting exchange rates and stock prices. Thispaper examines the predictive ability of two types oftrading rule, the moving average oscillator andtrading range break-out, in the London StockExchange by analysing daily data on the FT30 indexfor the period 1935–1994. It is found that, for thetwenty year sub-periods 1935–1954 and 1955–1974,trading strategies based on these rules would haveproducedaconsiderablygreaterreturnthanasimplebuy-and-hold strategy, and these results are statisti-callyreliable,havingbeenassessedusingacomputerintensive simulation procedure known as bootstrap-ping. The most recent twenty year period, however,is very different, for it provides no evidence whatso-ever that trading rules have provided any usefulsignals for predicting price movements. When thisperiod isexaminedinmoredetail,itisfound that theperformanceofthetradingrulesbegantodeterioratebadly in the early 1980s, when the FT30 started toincrease substantially after many years of beingvirtually driftless over reasonable lengths of time.These driftless periods were also ones in whichreturns were more predictable, implying that themarketwaslessefficient.Theconclusionthattradingrulescanpredictstockprices,andarethusprofitable,only in periods when the market is inefficient,appears inescapable. The results are also comparedto earlier findings on the New York Stock Exchangeand, in terms of the periods over which trading rulesare effective, the two markets appear to behavesimilarly. However, the ‘break-down’ period fromthe early 1980s has yet to be analysed using thesetechniquesforNewYork,whichwouldthusbeaveryinteresting exercise to undertake.
TL;DR: In this article, the authors investigated the existence of security price anomalies, or "calendar effects" in the Financial Times Industrial Ordinary Shares Index over a 60-year period: 1 July 1935 through 31 December 1994.
Abstract: This paper investigates the existence of security price anomalies, or ‘calendar effects’ in the Financial Times Industrial Ordinary Shares Index over a 60 year period: 1 July 1935 through 31 December 1994 Our results broadly support similar evidence documented for many countries concerning stock market anomalies, as the weekend, January and holiday effects all appear, to some extent, to be present in our data set We conclude, that even if these anomalies are persistent in their occurrence and magnitude, the cost of implementing any potential ‘trading rules’ may be prohibitive due to the illiquidity of the market and ‘round trip’ transactions costs This is of course perfectly consistent with the notion of market efficiency, in that no strategy exists that will consistently yield abnormal returns
TL;DR: In this article, the authors examined intra-day variations in the bid-ask spread, volatility and volume for stocks traded on the London Stock Exchange during the first quarter of 1991.
Abstract: This paper examines intra-day variations in the bid-ask spread, volatility and volume for stocks traded on the London Stock Exchange. The data set used consists of quote and transactions data for a large sample of 835 stocks traded during the first quarter of 1991. The focus of the study is twofold; first, is to document a number of stylized facts regarding the intra-day behaviour of spread, trading volume, volatility etc. Second, the paper tests some predictions of two theoretical models of intra-day behaviour: the Admati and Pfleiderer and the Brock and Kleidon models. In addition, the paper also studies qualitatively the intra-day behaviour of several variables of interest including volume per transaction, transactions per fifteen-minute interval and spreads/trading volume for stocks of differing liquidity. The results suggest that the bid-ask spread is wide at the open, constant through the day and rises slightly at the close. Trading volume, in contrast is not highest at the open and the close. Volatility, based on the mid-point of the inside spread, shows a U-shaped pattern. Volume per transaction, in contrast, is fairly constant throughout the day. Further, the intra-day trading volume pattern differs for liquid and illiquid stocks. The results provide mixed support for current theoretical models of intra-day behaviour of spread, volume and volatility on the London Stock Exchange
TL;DR: In this article, the authors examine rights issues on the Oslo Stock Exchange, where seasoned public offerings now take place almost exclusively through use of the relatively expensive standby underwriting method rather than unsinsured rights.