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The Rise and Fall of the AMEX Emerging Company Marketplace

  • REENA AGGARWAL
  • JAMES J. ANGEL

    ()

    (Georgetown University School of Business)

In 1992, the AMEX launched the Emerging Company Marketplace (ECM) to trade the stocks of small but growing companies. After listing on the ECM, stocks experienced dramatic decreases in bid-ask spreads, but showed mixed results on price and trading volume. News coverage of the ECM stocks rose significantly. Yet few firms chose to list on the new ECM, and the AMEX closed it in 1995. What went wrong? A series of scandals tarred the image of the exchange. Furthermore, auction markets historically have not fared well against dealer markets for very small firms. For some companies, it is worthwhile to subsidize the distribution channel for their stock by listing in a higher transaction cost dealer market, which gives dealers incentive to publicize the firm.

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Paper provided by Georgetown School of Business in its series Working Papers with number _002.

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Handle: RePEc:wop:gesbwp:_002
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  1. G. Maxwell Ule, 1937. "Price Movements of Newly Listed Common Stocks," The Journal of Business, University of Chicago Press, vol. 10, pages 346.
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  8. Huang, Roger D. & Stoll, Hans R., 1996. "Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE," Journal of Financial Economics, Elsevier, vol. 41(3), pages 313-357, July.
  9. Barber, Brad M. & Lyon, John D., 1997. "Detecting long-run abnormal stock returns: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 43(3), pages 341-372, March.
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  11. Jim Angel & Reena Aggarwal, . "Optimal Listing Strategy: Why Microsoft and Intel Do Not List on the NYSE," Working Papers _007, Georgetown School of Business.
  12. Kandel, Eugene & Marx, Leslie M., 1997. "Nasdaq market structure and spread patterns," Journal of Financial Economics, Elsevier, vol. 45(1), pages 61-89, July.
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