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Stock exchange
About: Stock exchange is a research topic. Over the lifetime, 39566 publications have been published within this topic receiving 612044 citations.
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TL;DR: In this article, the effect on share value of listing on the New York Stock Exchange and reports the results of a joint test of Merton's (1987) investor recognition factor and Amihud and Mendelson's (1986) liquidity factor as explanations of the change in share value.
Abstract: This article documents the effect on share value of listing on the New York Stock Exchange and reports the results of a joint test of Merton's (1987) investor recognition factor and Amihud and Mendelson's (1986) liquidity factor as explanations of the change in share value. We find that during the 1980s stocks earned abnormal returns of 5 percent in response to the listing announcement and that listing is associated with an increase in the number of shareholders and a reduction in bid-ask spreads. Cross-sectional regressions provide support for both investor recognition and liquidity as sources of value from exchange listing. THE EFFECT ON SHARE value of listing on the New York Stock Exchange (NYSE) by over-the-counter (OTC) stocks has been the focus of empirical investigation by scholars and practitioners for at least 50 years.' The consensus conclusion is that an NYSE listing is (or at least has been) associated with a significant increase in share price. "Streetlore" has historically attributed this increase in value to the increased investor recognition that is believed to accompany listing on a major exchange. Until recently, this investor recognition explanation has lacked a rigorous analytical foundation. Merton (1987) fills this void with a model of capital market equilibrium with incomplete information. To develop his model, Merton adopts most of the assumptions of the original Sharpe-Lintner-Mossin Capital Asset Pricing Model (CAPM) but relaxes the assumption of equal information across investors. He further assumes that investors invest only in the those securities of which they are aware.2 With this modification to the original CAPM framework, Merton derives a model in which expected returns increase with systematic risk, firm-specific risk, and relative market value and decrease
470 citations
TL;DR: In this paper, the authors analyzed the price effects following the addition of individual stocks to the Hong Kong stock market and found that short-sales constraints tend to cause stock overvaluation and that the effect is more dramatic for individual stocks for which wider dispersion of investor opinions exists.
Abstract: Short-sales practices in the Hong Kong stock market are unique in that only stocks on a list of designated securities can be sold short. By analyzing the price effects following the addition of individual stocks to the list, we find that short-sales constraints tend to cause stock overvaluation and that the overvaluation effect is more dramatic for individual stocks for which wider dispersion of investor opinions exists. These findings are consistent with Miller's (1977) intuition and other optimism models. We also document higher volatility and less positive skewness of individual stock returns when short sales are allowed. THE QUESTION OF HOW SHORT SALES IMPACT capital markets is highly controversial, with short-sale regulations varying widely across countries and capital markets.1 Although short selling has been carried out for years in major financial markets around the world, its effects on market efficiency, especially on pricing efficiency, remain of interest to financial researchers. Miller (1977) theorizes that in the presence of short-sales constraints, security prices tend to reflect a more optimistic valuation than the average opinion of potential investors and thus tend to be upward biased. This overvaluation argument is based on two conditions: (1) A security's short sales are either prohibited or costly, and (2) investors have heterogeneous beliefs or information about the security's value. The underlying intuition is quite straightforward. Pessimistic investors are forced to sit out of the market when short sales are not available, and thus some negative information is not reflected in prices, enabling enthusiastic buyers to bid prices above the level that average investors perceive as fair. This argument has significant implications for market efficiency theories, since one of the major functions of capital markets is price discovery. Indeed, an efficient market should be "a market in which prices always
468 citations
TL;DR: In this paper, an analysis of data on stock markets in 16 developing countries suggests that stock markets become larger, more liquid, more integrated internationally, and more volatile after controls on capital and dividend flows are liberalized.
466 citations
TL;DR: This article found that there is no long-run significant relationship between stock prices and exchange rates in the G-7 countries and that the short run significant relationship has only been found for one day in certain G7 countries, and they also found that the record of stock price and the value of the dollar cannot be depended on when predicting the future in the US.
464 citations
TL;DR: In this article, the authors examined whether or not the convergence of European economies towards economic and monetary Union (EMU) and the launch of the single currency leads to an increase in stock market integration through a reduction in investment barriers.
Abstract: The paper examines whether or not the convergence of European economies towards Economic and Monetary Union (EMU) and the launch of the single currency leads to an increase in stock market integration through a reduction in investment barriers. We estimate a conditional asset pricing model, which allows for a time-varying degree of integration that measures the importance of EU-wide risk relative to country-specific risk. The model accounts for intra-European currency risk, time-varying quantities and prices of risk. The results indicate that the degree of integration is closely related to forward interest differentials vis-a-vis Germany, i.e. to the probability of a country joining EMU. As the probability of the single currency materializing increases, restrictions on holding foreign assets become less binding, leading to higher market integration.
462 citations