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Stock Exchange Competition in a Simple Model of Capital Market Equilibrium

Author

Listed:
  • Sofia B. RAMOS

    (ISCTE-Business School and CEMAF)

  • Ernst-Ludwig VON THADDEN

    (HEC-University of Lausanne, FAME and CEPR)

Abstract

This paper uses a simple model of mean-variance asset pricing with transaction costs to analyze one of the main empirical phenomena in stock market competition in the last years, the decrease of transaction costs. We endogenize transaction costs as variables strategically influenced by stock exchanges and model stock market integration as an increase in the correlation of the underlying stock market returns. Among other things, we find that market integration leads to a decrease of transaction costs and to an increase in long-term trading activity.

Suggested Citation

  • Sofia B. RAMOS & Ernst-Ludwig VON THADDEN, 2003. "Stock Exchange Competition in a Simple Model of Capital Market Equilibrium," FAME Research Paper Series rp109, International Center for Financial Asset Management and Engineering.
  • Handle: RePEc:fam:rpseri:rp109
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    References listed on IDEAS

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    Cited by:

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    2. Kathryn L Dewenter & Xi Han & Jennifer L Koski, 2018. "Who Wins When Exchanges Compete?* Evidence from Competition after Euro Conversion [Equity returns and integration: is Europe changing?]," Review of Finance, European Finance Association, vol. 22(6), pages 2037-2071.
    3. Kim, Heeho & Cho, Seong-Hoon & Kim, Yongku, 2015. "Home bias, risk differential, and cultural spatial spillover effects," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 114-136.
    4. Jérémy Ducros & Angelo Riva, 2014. "The Lyon Stock Exchange: A Struggle for Survival (1866-1914)," PSE Working Papers halshs-00960528, HAL.
    5. Jérémy Ducros & Angelo Riva, 2018. "The Lyon Stock Exchange: The Survival of the Fittest (1866-1914)," Working Papers halshs-01800720, HAL.
    6. Hesham Abdelghany, 2015. "The effect of accounting disclosure quality and information asymmetry on the stock market activity ? an applied study on listed companies in the Egyptian stock market," Proceedings of International Academic Conferences 2704127, International Institute of Social and Economic Sciences.
    7. Sofia B. Ramos, 2003. "Competition Between Stock Exchanges: A Survey," FAME Research Paper Series rp77, International Center for Financial Asset Management and Engineering.
    8. Otchere, Isaac, 2006. "Stock exchange self-listing and value effects," Journal of Corporate Finance, Elsevier, vol. 12(5), pages 926-953, December.

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    More about this item

    Keywords

    Stock Exchange Competition; Capital Markets Equilibrium; Transaction Costs;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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