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Stock Exchange Mergers and Market Efficiency

Author

Listed:
  • Amélie Charles

    () (Audencia Recherche - Audencia Business School)

  • Olivier Darné

    () (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - UN - Université de Nantes)

  • Jae H. Kim

    () (School of Economics and Finance - School of Economics and Finance)

  • Etienne Redor

    () (Audencia Recherche - Audencia Business School)

Abstract

The aim of this paper is to examine the positive and negative impacts of stock exchange mergers on the informational efficiency of the markets. We consider a range of factors in relation to the stock exchange merger, that can potentially affects market efficiency, after a merger. These factors include the maturity of the markets being merged, the size of the markets, and different types of mergers (developed markets versus developing markets; large stock exchange mergers versus small stock exchange mergers; and domestic stock exchange mergers versus cross-border stock exchange mergers). For this purpose, we use a time-varying return predictability test which allows us to detect periods of (in)efficiency, and thus to conduct a comparative analysis for pre-merger and post-merger periods. We find that increases in efficiency are less frequent than decreases in efficiency after a stock exchange merger. Finally, we provide the empirical evidence that the impact on efficiency depends on range of the characteristics of the merger: stock exchange's country's level of development, size, geographical diversification and industrial diversification.

Suggested Citation

  • Amélie Charles & Olivier Darné & Jae H. Kim & Etienne Redor, 2014. "Stock Exchange Mergers and Market Efficiency," Working Papers hal-00940105, HAL.
  • Handle: RePEc:hal:wpaper:hal-00940105
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00940105
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    References listed on IDEAS

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    Cited by:

    1. Liu, Yuna, 2016. "Essays on Stock Market Integration - On Stock Market Efficiency, Price Jumps and Stock Market Correlations," Umeå Economic Studies 926, Umeå University, Department of Economics.
    2. repec:eee:intfin:v:53:y:2018:i:c:p:17-49 is not listed on IDEAS
    3. Liu, Yuna, 2016. "Stock exchange integration and price jump risks - The case of the OMX Nordic exchange mergers," Umeå Economic Studies 925, Umeå University, Department of Economics.

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    Keywords

    Martingale difference sequence; Stock exchange mergers; Market efficiency; Martingale difference sequence.;

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