Skip navigation

Market Microstructure and Securities Values: Evidence from the Tel Aviv Stock Exchange

Authors: Amihud, Yakov
Mendelson, Haim
Lauterbach, Beni
Issue Date: Oct-1997
Series/Report no.: FIN-98-004
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.
Appears in Collections:Economics Working Papers

Files in This Item:
File Description SizeFormat 
wpa98004.pdf1.51 MBAdobe PDFView/Open

Items in FDA are protected by copyright, with all rights reserved, unless otherwise indicated.