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Central Clearing and Asset Prices

Author

Listed:
  • Albert J. Menkveld

    (VU University Amsterdam)

  • Emiliano Pagnotta

    (NYU Stern School of Business, United States of America)

  • Marius A. Zoican

    (VU University Amsterdam, Tinbergen Institute and Duisenberg School of Finance)

Abstract

We investigate the effects of introducing a central clearing counterparty (CCP) on securities prices by adopting as an experimental construct the 2009 CCP reform in three Nordic markets. We find that, relative to other European economies, these countries experience market-adjusted equity returns of -1.08% per month during a 16-month announcement window. We also find negative effects on price-earnings ratios. The decrease in prices is less pronounced for stocks with low number of counterparties and,consistent with the margin-CAPM, more pronounced for stocks with higher margins. Our results suggest that introducing a CCP may have unintended negative consequences for public corporations.

Suggested Citation

  • Albert J. Menkveld & Emiliano Pagnotta & Marius A. Zoican, 2013. "Central Clearing and Asset Prices," Tinbergen Institute Discussion Papers 13-181/IV/DSF67, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20130181
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    File URL: http://papers.tinbergen.nl/13181.pdf
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    References listed on IDEAS

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    Cited by:

    1. Asaf Bernstein & Eric Hughson & Marc D. Weidenmier, 2014. "Counterparty Risk and the Establishment of the New York Stock Exchange Clearinghouse," NBER Working Papers 20459, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    clearing; asset prices; margins; liquidity;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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