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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26512
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| Title: | Asset Returns and the Listing Choice of Firms |
| Authors: | Baruch, Shmuel
Saar, Gideon |
| Issue Date: | Nov-2004 |
| Series/Report no.: | FIN-04-005 |
| Abstract: | We propose a mechanism that relates asset returns to the firm s optimal
listing choice. The crucial element in our framework is not a difference
in the structure or rules of the alternative markets, but a difference
in the return patterns of the securities that are traded on these
markets. We use a simple trading model with asymmetric information to
show that a stock would be more liquid when it is listed on a market
with similar securities, or securities with correlated payoff
patterns. We empirically examine the implications of our model using
NYSE and Nasdaq securities, and document that the return patterns of
stocks listed on the NYSE indeed look different from the return patterns
of Nasdaq stocks. Stocks that are eligible to list on another market but
do not switch have return patterns that are similar to other securities
on their own market and different from securities listed on the other
market. We show that the return patterns of stocks that switch markets
change in the two years prior to the move in the direction of being more
similar to the stocks on the new market. Our results are consistent with
the notion that managers choose the market on which to list to maximize
the liquidity of their stocks. |
| URI: | http://hdl.handle.net/2451/26512 |
| Appears in Collections: | Finance Working Papers
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