TY - JOUR
T1 - Market microstructure and securities values
T2 - Evidence from the Tel Aviv stock exchange
AU - Amihud, Yakov
AU - Mendelson, Haim
AU - Lauterbach, Beni
PY - 1997/9
Y1 - 1997/9
N2 - 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.
AB - 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.
KW - Liquidity
KW - Market microstructure
KW - Trading systems
UR - http://www.scopus.com/inward/record.url?scp=0031234564&partnerID=8YFLogxK
U2 - 10.1016/S0304-405X(97)00021-4
DO - 10.1016/S0304-405X(97)00021-4
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AN - SCOPUS:0031234564
SN - 0304-405X
VL - 45
SP - 365
EP - 390
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 3
ER -