Title: | 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. |
URI: | http://hdl.handle.net/2451/26846 |
Appears in Collections: | Economics Working Papers |
Files in This Item:
File | Description | Size | Format | |
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wpa98004.pdf | 1.51 MB | Adobe PDF | View/Open |
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