Stock exchange

About: Stock exchange is a research topic. Over the lifetime, 39566 publications have been published within this topic receiving 612044 citations.

Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation

Abstract: Linear and nonlinear Granger causality tests are used to examine the dynamic relation between daily Dow Jones stock returns and percentage changes in New York Stock Exchange trading volume. We find evidence of significant bidirectional nonlinear causality between returns and volume. We also examine whether the nonlinear causality from volume to returns can be explained by volume serving as a proxy for information flow in the stochastic process generating stock return variance as suggested by Clark's (1973) latent common-factor model. After controlling for volatility persistence in returns, we continue to find evidence of nonlinear causality from volume to returns.

Stock Prices and Volume

Abstract: The authors undertake a comprehensive investigation of price and volume co-movement using daily New York Stock Exchange data from 1928 to 1987. They adjust the data to take into account well-known calendar effects and long-run trends. To describe the process, they use a seminonparametric estimate of the joint density of current price change and volume conditional on past price changes and volume. Four empirical regularities are found: (1) positive correlation between conditional volatility and volume; (2) large price movements are followed by high volume; (3) conditioning on lagged volume substantially attenuates the "leverage" effect, and (4) after conditioning on lagged volume, there is a positive risk-return relation. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices

Abstract: A stock market liberalization is a decision by a country's government to allow foreigners to purchase shares in that country's stock market. On average, a country's aggregate equity price index experiences abnormal returns of 3.3 percent per month in real dollar terms during an eight-month window leading up to the implementation of its initial stock market liberalization. This result is consistent with the prediction of standard international asset pricing models that stock market liberalization may reduce the liberalizing country's cost of equity capital by allowing for risk sharing between domestic and foreign agents. A stock market liberalization is a decision by a country's government to allow foreigners to purchase shares in that country's stock market. Standard international asset pricing models (JAPMs) predict that stock market liberalization may reduce the liberalizing country's cost of equity capital by allowing for risk sharing between domestic and foreign agents (Stapleton and Subrahmanyan (1977), Errunza and Losq (1985), Eun and Janakiramanan (1986), Alexander, Eun, and Janakiramanan (1987), and Stulz (1999a, 1999b)). This prediction has two important empirical implications for those emerging countries that liberalized their stock markets in the late 1980s and early 1990s. First, if stock market liberalization reduces the aggregate cost of equity capital then, holding expected future cash flows constant, we should observe an increase in a country's equity price index when the market learns that a stock market liberalization is going to occur. The second implication is

On the efficiency of competitive stock markets where trades have diverse information

Abstract: I HAVE SHOWN elsewhere that competitive markets can be "over-informationally" efficient. (See Grossman [1975] for this and a review of other work in this area.) If competitive prices reveal too much information, traders may not be able to earn a return on their investment in information. This was demonstrated for a market with two types of traders, "informed" and "uninformed." "Informed" traders learn the true underlying probability distribution which generates a future price, and they take a position in the market based on this information. When all informed traders do this, current prices are affected. "Uninformed" traders invest no resources in collecting information, but they know that current prices reflect the information of informed traders. Uninformed traders form their beliefs about a future price from the information of informed traders which they learn from observing current prices. In the above framework, prices transmit information. However, it is often claimed that prices aggregate information. In this paper we analyze a market where there are n-types of informed traders. Each gets a "piece of information." In a simple model we study the operation of the price system as an aggregator of the different pieces of information. We consider a market where there are two assets; a risk free asset and a risky asset. Each unit of the risky asset yields a return of P1 dollars. P1 will also be referred to as the price of the risky asset in period 1. In period 0 (the current period), each trader gets information about P1 and then decides how much of risky and non-risky assets to hold. This determines a current price of the risky asset, P0, which will depend on the information received by all traders. We assume that the ith trader observes yj, where yi = PI + ,E. There is a noise term, 'E, which prevents any trader from learning the true value of P1. The current equilibrium price is a function of (Y1Y25 ... Yn); write it as PO(Y,Y2, ... 5Yn). The main result of this paper is that when there are n-types of traders (n > 1), PO reveals information to each trader which is of "higher quality" than his own information. That is, the competitive system aggregates all the market's information in such a way that the equilibrium price summarizes all the information in the

Stock Prices and Social Dynamics

Abstract: The empirical evidence that is widely interpreted as supporting the efficient markets theory in finance actually does not rule out the possibility that changing fashions or fads among investors have an important influence on prices in financial markets. A model of the impact of such fashions on prices is proposed and used in an exploratory data analysis of the aggregate United States Stock Market in the 20th century. (This abstract was borrowed from another version of this item.)