When an event is not an event : the curious case of an emerging market

Shares trading in the Bolsa mexicana de Valores do not seem to react to company news. Using a sample of Mexican corporate news announcements from the period July 1994 through June 1996, this paper finds that there is nothing unusual about returns, volatility of returns, volume of trade or bid-ask spreads in the event window. This suggests one of five possibilities: our sample size is small; or markets are inefficient; or markets are efficient but the corporate news announcements are not value-relevant; or markets are efficient and corporate news announcements are value-relevant, but they have been fully anticipated; or markets are efficient and corporate news announcements are value-relevant, but unrestricted insider trading has caused prices to fully incorporate the information. The evidence supports the last hypothesis. The paper thus points towards a methodology for ranking emerging stock markets in terms of their market integrity, an approach that can be used with the limited data available in such markets

The anatomy of a call market: evidence from Germany

SIGLEAvailable from Bibliothek des Instituts fuer Weltwirtschaft, ZBW, Duesternbrook Weg 120, D-24105 Kiel W 1055 (23) / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekDEGerman

The anatomy of a call market : evidence from Germany

This paper provides a detailed empirical analysis of the call auction procedure on the German stock exchanges. The auction is conducted by the Makler whose position resembles that of a NYSE specialist. We use a dataset which contains information about all individual orders for a sample of stocks traded on the Frankfurt Stock Exchange (FSE). This sample allows us to calculate the cost of transacting in a call market and compare them to the costs of transacting in a continuous market. We find that transaction costs for small transactions in the call market are lower than the quoted spread in the order book of the continuous market whereas transaction costs for large transactions are higher than the spread in the continuous market. We further address the question whether active participation of the Makler is advantageous. On the one hand he may accomodate order imbalances, increase the liquidity of the market and stabilize prices. On the other hand, the discretion in price setting gives him an incentive to manipulate prices. This may increase return volatility. Our dataset identifies the trades the Maklers make for their own accounts. We eliminate these trades and determine the price that would have obtained without their participation. Comparing this hypothetical price series to the actual transaction prices, we find that Makler participation tends to reduce return volatility. A further analysis shows that the actual prices are much closer to the surrounding prices of the continuous trading session than the hypothetical prices that would have obtained without Makler participation. These results indicate that the Maklers provide a valuable service to the market. We further calculate the profits associated with the positions taken by the Maklers and find that, on average, they do not earn profits on the positions they take. Their compensation is thus restricted to the commissions they receive

Normalisation et theorie comptable

SIGLEAvailable at INIST (FR), Document Supply Service, under shelf-number : DO 1705 / INIST-CNRS - Institut de l'Information Scientifique et TechniqueFRFranc

When an event is not an event: The curious case of an emerging market

Shares trading in the Bolsa Mexicana de Valores do not seem to react to company news. Using a sample of Mexican corporate news announcements from the period July 1994 through June 1997, this paper finds that there is nothing unusual about returns, volatility of returns, volume of trade or bid-ask spreads in the event window. We provide evidence that suggests that unrestricted insider trading causes prices to fully incorporate the information before its public release. The paper thus points toward a methodology for ranking emerging stock markets in terms of their market integrity, an approach that can be used with the limited data available in such markets. © 2000 Elsevier Science B.V

Was leisten die Kursmakler? | Eine empirische Untersuchung am Beispiel der Frankfurter Wertpapierbörse

What is the Performance of the „Makler"? An Empirical Analysis Based on the Example of the Frankfurt Stock Exchange The present contribution represents a detailed empirical analysis of the role of the specialists („Makler“) operating at the Frankfurt Stock Exchange. The dataset employed permits the impact of specialist activities on liquidity and volatility to be analysed as well as the profitability of the specialists’ transactions to be evaluated. Specialist participation in floor trading is substantial. The trades they make for their own accounts account for over 20 % of the volume in the batched auctions and for over 40 % of the volume in the continuous trading session. It is also shown with regard to the latter that specialist activities visibly help reduce the bid-ask spread. The effective spread ultimately paid is less than one-third of the spread calculated from the orders in the specialist’s limit order book. It is shown that specialist participation in the batched auctions results in reduced volatility. The specialists’ impact on volatility is sometimes evaluated on the basis of the „specialist stabilization ratio“. We argue, however, that this measure does not supply meaningful results. During our sample period specialists did, on average, not earn profits on the trades they made for their own account. Decomposing overall profits shows that positive spread revenues cannot compensate for positioning losses. Overall, our analysis shows that specialists are contributing towards a higher quality of Germany’s stock markets. The implications of these results for the way in which stock trading should be organized in Germany are discussed