Market microstructure and securities values: Evidence from the Tel Aviv stock exchange

Yakov Amihud, Haim Mendelson, Beni Lauterbach

Research output: Contribution to journalArticlepeer-review

308 Scopus citations

Abstract

This paper examines the value effects of improvements in the trading mechanism. Selected 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.

Original languageEnglish
Pages (from-to)365-390
Number of pages26
JournalJournal of Financial Economics
Volume45
Issue number3
DOIs
StatePublished - Sep 1997

Keywords

  • Liquidity
  • Market microstructure
  • Trading systems

Fingerprint

Dive into the research topics of 'Market microstructure and securities values: Evidence from the Tel Aviv stock exchange'. Together they form a unique fingerprint.

Cite this