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Market Response to Liquidity Improvements: Evidence from Exchange Listings

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  • Elyasiani, Elyas
  • Hauser, Shmuel
  • Lauterbach, Beni

Abstract

The study examines a sample of 895 stocks that moved from Nasdaq to the New York Stock Exchange or to the American Stock Exchange between 1971 and 1994. We show how various measures of liquidity such as the bid-ask spread, trading volume, and stock price precision improve in somewhat different ways upon transfer to NYSE (Amex). We also find that reductions in trading costs (% spread) and in pricing error volatility (Hasbrouck's sigma[subscript s]) can explain most of the stock market's positive response to exchange listing. Thus, liquidity has many facets and cannot be represented by the bid-ask spread alone. Copyright 2000 by MIT Press.

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Bibliographic Info

Article provided by Eastern Finance Association in its journal The Financial Review.

Volume (Year): 35 (2000)
Issue (Month): 1 (February)
Pages: 1-14

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Handle: RePEc:bla:finrev:v:35:y:2000:i:1:p:1-14

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Web page: http://www.easternfinance.org/
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Web: http://www.blackwellpublishing.com/subs.asp?ref=0732-8516

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Cited by:
  1. Gottesman, Aron A. & Nam, Jouahn & Thornton Jr., John H. & Wynne, Kevin, 2010. "NYSE listings and firm borrowing costs: An empirical investigation," Global Finance Journal, Elsevier, vol. 21(1), pages 26-42.
  2. Wenbin Tang & Hoang Nguyen & Van Nguyen, 2013. "The effects of listing changes between NASDAQ market segments," Journal of Economics and Finance, Springer, vol. 37(4), pages 584-605, October.
  3. Eldor, Rafi & Hauser, Shmuel & Pilo, Batia & Shurki, Itzik, 2006. "The contribution of market makers to liquidity and efficiency of options trading in electronic markets," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 2025-2040, July.
  4. Papaioannou, George J. & Travlos, Nickolaos G. & Viswanathan, K.G., 2009. "Visibility effects and timing in stock listing changes: Evidence from operating performance," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 357-377, May.
  5. Cécile Carpentier & Douglas Cumming & Jean-Marc Suret, 2010. "The Valuation Effect of Listing Requirements: An Analysis of Venture Capital-Backed IPOs," CIRANO Working Papers 2010s-01, CIRANO.
  6. Tse, Yiuman & Devos, Erik, 2004. "Trading costs, investor recognition and market response: An analysis of firms that move from the Amex (Nasdaq) to Nasdaq (Amex)," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 63-83, January.
  7. Faff, Robert W. & Hodgson, Allan & Saudagaran, Shahrokh, 2002. "International cross-listings towards more liquid markets: the impact on domestic firms," Journal of Multinational Financial Management, Elsevier, vol. 12(4-5), pages 365-390.
  8. Nikolaus Hautsch, 2002. "Modelling Intraday Trading Activity Using Box-Cox-ACD Models," CoFE Discussion Paper 02-05, Center of Finance and Econometrics, University of Konstanz.
  9. Weiyu Kuo & Yu‐Ching Li, 2011. "Trading Mechanisms and Market Quality: Call Markets versus Continuous Auction Markets," International Review of Finance, International Review of Finance Ltd., vol. 11(4), pages 417-444, December.

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