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Misinformation and Regulatory Actions in the Canadian Capital Markets: Some Empirical Evidence

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  • Lawrence Kryzanowski

Abstract

In this paper the effect of allegedly manipulative activities on stock returns and the effectiveness of trading suspensions in arresting such manipulations are empirically studied. The results from conducting both a Fama-Fisher-Jensen-Roll test and a portfolio test on the error terms computed from a single factor market in periods surrounding a trading suspension are presented. The findings clearly identify regulators as having access to predominantly unfavorable new information about allegedly manipulative activities that is not "fully reflected" in stock prices prior to a trading suspension. Furthermore, since unfavorable information disclosures during a trading suspension period are found not to be fully reflected in stock prices on the date of trading reinstatement, the market is deemed to be inefficient in the semistrong form.

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  • Lawrence Kryzanowski, 1978. "Misinformation and Regulatory Actions in the Canadian Capital Markets: Some Empirical Evidence," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 355-368, Autumn.
    • Handle: RePEc:rje:bellje:v:9:y:1978:i:autumn:p:355-368
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    Cited by:

    1. Ronald King & Grace Pownall & Gregory Waymire, 1992. "Corporate disclosure and price discovery associated with NYSE temporary trading halts," Contemporary Accounting Research, John Wiley & Sons, vol. 8(2), pages 509-531, March.
    2. Lorne N. Switzer & Jun Wang, 2017. "An event based approach for quantifying the effects of securities fraud in the IT industry," Information Systems Frontiers, Springer, vol. 19(3), pages 457-467, June.
    3. Charles M.C. Lee, 1992. "Discussion of “Corporate disclosure and price discovery associated with NYSE temporary trading haltsâ€," Contemporary Accounting Research, John Wiley & Sons, vol. 8(2), pages 532-539, March.
    4. Kryzanowski, Lawrence & Perrakis, Stylianos & Zhong, Rui, 2021. "Financial oligopolies and parallel exclusion in the credit default swap markets," Journal of Financial Markets, Elsevier, vol. 56(C).
    5. repec:vuw:vuwscr:18930 is not listed on IDEAS
    6. Haung, Meng & Marsden, Alastair & Poskitt, Russell, 2006. "The Impact of Disclosure Reform on the NZX's Financial Information Environment," Working Paper Series 18930, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    7. Kryzanowski, Lawrence & Zhang, Ying, 2013. "Financial restatements by Canadian firms cross-listed and not cross-listed in the U.S," Journal of Multinational Financial Management, Elsevier, vol. 23(1), pages 74-96.
    8. Haung, Meng & Marsden, Alastair & Poskitt, Russell, 2006. "The Impact of Disclosure Reform on the NZX's Financial Information Environment," Working Paper Series 3835, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

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