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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 of the tick size reduction on execution costs of stocks was studied. But the authors emphasize that spreads are not a sufficient statistic for market quality and that small smaller tick sizes may actually reduce market liquidity.
220 citations
TL;DR: In this paper, the authors study changes in liquidity following the introduction of a new electronic limit order market when trading is centralized in a single-limit order market and also study how automation of routing decisions and trading fees affect the relative liquidity of rival markets.
Abstract: We study changes in liquidity following the introduction of a new electronic limit order market when, prior to its introduction, trading is centralized in a single limit order market. We also study how automation of routing decisions and trading fees affect the relative liquidity of rival markets. The theoretical analysis yields three main predictions: (i) consolidated depth is larger in the multiple limit order markets environment, (ii) consolidated bid-ask spread is smaller in the multiple limit order markets environment and (iii) the liquidity of the entrant market relative to that of the incumbent market increases with the level of automation for routing decisions (the proportion of "smart routers"). We test these predictions by studying the rivalry between the London Stock Exchange (entrant) and Euronext (incumbent) in the Dutch stock market. The main predictions of the model are supported.
219 citations
TL;DR: In this article, the authors examined the relationship among corporate characteristics, the governance structure of the firm, and its disclosure policy and found that a firm's size, along with some mechanisms of corporate governance such as the proportion of independents on the board, the appointment of an audit committee, and directors' shareholdings and stock option plans, are positively related to voluntary disclosure.
219 citations
TL;DR: In this article, the authors studied cross-sectional variations in stock trading activity for a comprehensive sample of NYSE/AMEX and Nasdaq stocks over a period of thirty-six years, and found that trading activity depends on the extent of liquidity trading, the mass of informed agents, and dispersion of opinion about the stock's fundamental value.
Abstract: This paper studies cross-sectional variations in stock trading activity for a comprehensive sample of NYSE/AMEX and Nasdaq stocks over a period of thirty-six years. Our theoretical framework indicates that trading activity depends on the extent of liquidity trading, the mass of informed agents, and dispersion of opinion about the stock's fundamental value. We further postulate that liquidity or noise trading depends both on a stock's visibility and on portfolio rebalancing needs triggered by past stock price performance. We use size, firm age, price, and the book-to-market ratio as proxies for a firm's visibility. The mass of informed agents is proxied by the number of analysts following the stock, while analyst forecast dispersion, systematic risk, and firm leverage proxy for divergence of opinion. Past return is by far the most significant predictor of stock turnover. Forecast dispersion and systematic risk also play important roles in predicting the cross-section of expected trading activity. Stocks that have performed well in a given year experience aggressive buying pressure in the subsequent year, which points to the presence of momentum investing. Overall, the results support theories of trading based on differences of opinion and stock visibility.
219 citations
TL;DR: In this paper, the authors consider one major SEW-preserving mechanism, having as chief executive officer (CEO) a member of the controlling family, and hypothesize that this choice is an asset in business contexts, such as industrial districts, in which tacit rules and social norms are relatively more important, but a potential liability in contexts like stock exchange markets, where formal regulations and transparency principles take center stage.
Abstract: We ask whether choices aimed at preserving socioemotional wealth (SEW) represent an asset or a liability in family-controlled firms. Specifically, we consider one major SEW-preserving mechanism—having as chief executive officer (CEO) a member of the controlling family—and hypothesize that this choice is (1) an asset in business contexts, such as industrial districts, in which tacit rules and social norms are relatively more important, but (2) a potential liability in contexts like stock exchange markets, where formal regulations and transparency principles take center stage. The results from our empirical analysis confirm these hypotheses.
219 citations