Suchergebnisse

Purpose
The purpose of this paper is to test and model non-linearities in block price deviations when they are executed outside the bid-ask quotes. The author conducts an empirical analysis on 662,312 transactions that were traded outside the bid-ask quotes in 2014 on the London Stock Exchange.


Design/methodology/approach
The tests reject the linearity hypothesis and the paper shows that the exponential smooth transition autoregressive model is capable of capturing the non-linear behaviour of block price misalignments.


Findings
The findings imply that when the deviation of block prices from their quoted value is small (large), trading will occur slowly (rapidly) to restore equilibrium, suggesting that trading costs eliminate continuous trading and that the block trade market is efficient.


Originality/value
The purpose of this paper is to re-model block price deviations from the bid-ask quotes. The major contribution is that the paper presents new empirical evidence, which explicitly allows for the possibility that block price misalignments from the bid-ask quotes can be characterized by a non-linear mean reverting process. The author demonstrates that the presence of transaction costs induces non-linear adjustments of block trade prices.

Purpose
– The purpose of this paper is to test if the empirical relationship between the size of trades and market liquidity can be pooled across different block sizes on the London Stock Exchange (LSE).


Design/methodology/approach
– The authors use pooling and non-pooling econometric tests in a panel framework.


Findings
– When the authors differentiate between various block sizes, the authors find that for trades in excess of 50,000 shares, there is a positive association between the size of the trade and the bid-ask spread, due to a lack of liquidity in the financial market. The results provide strong evidence that an upstairs market may be required in order to provide liquidity for large block trades on the LSE.


Originality/value
– This is the first study to directly test if the LSE requires an upstairs market to provide liquidity for large trade transactions.

PurposeThe purpose of this paper is to investigate the impact of the components of the bid‐ask spread around earnings announcements on the London Stock Exchange using intraday data obtained from the ICV Marketeye database. The paper finds that the information asymmetry cost component significantly increases around the earnings announcements, while the inventory holding and order processing cost components significantly decrease around the same period. Specifically, the economic magnitude of the increase in the asymmetric cost component implies that earnings announcements significantly increase the total bid‐ask spread, even when they result in decreased inventory holding and order processing costs.Design/methodology/approachLiquidity in financial markets around earnings announcements in the London Stock Exchange obtained by bid‐ask spread decompositions.FindingsThis paper investigates the impact of earnings announcements on the components of the bid‐ask spread on the London Stock Exchange using intraday data. The fundamental conclusion from the empirical findings is that the bid‐ask spread increases once the earnings have been announced, because the market makers' increased concerns about asymmetric information is more pronounced, than the lower inventory and order processing costs due to the higher levels of trading volume. This empirical finding also holds when the earnings announcements are partitioned into positive and negative surprises.Originality/valueThis is the first paper to decompose the bid‐ask spread around earnings announcements on the London Stock Exchange. The paper uses a unique intraday dataset.

PurposeThe purpose of this paper is to test for and model non‐linearities in option price deviations from the Black Scholes (BS) model in FTSE 100 index options over the time period 1997‐2006.Design/methodology/approachThe economic specification and estimation methodology is outlined, the data are discussed, and the empirical results are analysed.FindingsThe tests reject the linearity hypothesis and the paper shows that the exponential smooth transition autoregressive model is capable of capturing the non‐linear behaviour of option price misalignments. The paper finds that even though FTSE 100 index options are heavily traded, transaction costs prevent rapid adjustments of option prices from their "optimal" value.Originality/valueThe paper presents new empirical evidence, which explicitly allows for the possibility that option price misalignments from the BS price can be characterised by a non‐linear mean reverting process.

PurposeThis paper aims to examine the price impact of block trades for FTSE 100 firms.Design/methodology/approachUsing event studies a sample of 1.6 million block purchases and 1.2 million block sales over the time period 1998‐2005 is analysed.FindingsOnce block price effects are estimated using quote returns to eliminate bid‐ask bias, the asymmetry in buyer and seller initiated trades is eliminated.Research limitations/implicationsA possible avenue for future research may be to look at the impact of inflation on the asymmetry between block purchases and sales. This may be an interesting extension to the current study given that inflation appears to be an important determinant of the equity premium in international stock markets.Practical implicationsThe empirical results suggest that market liquidity is one of the factors that is driving the asymmetry between block purchases and sales on the London Stock Exchange. The paper is of interest to academics and practitioners who study and invest in block trades.Originality/valueThis is the first study of the UK stock market to encapsulate bid‐ask biases in block trades.

This book explores the microstructure of carbon markets and the pricing of carbon financial instruments generally. It provides a critical microstructure analysis of the EU Emissions Trading Scheme (EU-ETS), and also examines the theoretical and related market design issues affecting emissions trading schemes. Individual chapters analyse how intraday pricing evolves in carbon markets, the price impact of block trades in carbon financial instruments and their determinants, short and long-term liquidity effects in carbon markets, and the links between carbon market liquidity and efficiency. The aforementioned issues are explored using case studies of two major trading platforms operating within the EU-ETS. The book concludes by focusing on future policy and regulatory challenges in carbon markets, especially with respect to addressing pricing volatility challenges

PurposeThis paper aims to empirically examine the relationship between stock liquidity and asset pricing, using a new price impact ratio adjusted for free float as the approximation of liquidity. The free-float-adjusted ratio is free from size bias and encapsulates the impact of trading frequency. It is more comprehensive than alternative price impact ratios because it incorporates the shares available to the public for trading.Design/methodology/approachThe authors are using univariate and multivariate econometric methods to test the significance of a newly created price impact ratio. The authors are using secondary data and asset pricing models in their analysis. The authors use a data sample of all US listed companies over the period of 1997–2017.FindingsThe authors provide evidence that the free-float-adjusted price impact ratio is superior to all price impact ratios used in the previous academic literature. The authors also discover that their findings are robust to the financial crises between 2007 and 2009.Originality/valueThis is the first comprehensive study on a newly established price impact ratio. The authors show the significance of this ratio and explain why it is superior to all previous price impact ratios, established in prior research.

PurposeWe examine the impact of market frictions in the form of trading costs on investor average holding periods for stocks in the S&P global 1200 index to examine constraints on international portfolio diversification.Design/methodology/approachWe determine whether it is appropriate to pool stocks listed in the USA, Canada, Latin America, Europe, Japan, Asia and Australia into investigations using the same empirical specification. This is very important because the pooled effects may not provide consistent estimates of the average.FindingsWe report overwhelming econometric evidence that it is not valid to pool stocks in all the underlying regional equity indices for our investigation, indicating that the effect of frictions varies between markets.Research limitations/implicationsWhen we pool the stocks within markets, we discover that for companies listed in the USA, Europe, Canada and Australia, market frictions do not significantly influence holding periods and hence are not a barrier to portfolio rebalancing. However, companies listed in Latin America and Asia face market frictions, which are significant in terms of increasing holding periods.Practical implicationsWe ascertain that taking into account the properties of stock markets in different geographical locations is vital for understanding the limits on achieving international portfolio diversification.Originality/valueUnlike prior research, we overcome the problems caused by contemporaneous correlation, endogeneity and joint determination of investor average holding periods and trading costs by employing the Generalized Method of Moments (GMM) system panel estimator. This makes our empirical estimates robust and more reliable than the previous empirical research in this area.

Purpose
The purpose of this paper is to examine stock market reactions and liquidity effects following the first bank loan announcement of zero-leverage firms.


Design/methodology/approach
The authors use an event studies methodology in both a univariate and multivariate framework. The authors also use regression analysis.


Findings
Using a sample of 96 zero-leverage firms listed on the FTSE 350 index over the time period of 2000–2015, the authors find evidence of a significant and permanent stock price increase as a result of the initial debt announcement. The loan announcement results in a sustained increase in trading volume and liquidity. This improvement continues to persist once the authors control for stock price and trading volume effects in both the short and long run. Furthermore, the authors examine the spread decomposition around the same period, and discover the adverse selection of the bid–ask spread is significantly related to the initial bank loan announcement.


Research limitations/implications
The results can be attributed to the information cost/liquidity hypothesis, suggesting that investors demand a lower premium for trading stocks with more available information.


Originality/value
This is the first paper to look at multiple industries, more than one loan and information asymmetry effects.

ABSTRACTThis paper investigates the impact of government expenditure on growth, in a heterogeneous panel, for a sample of developing countries. Using generalized method of moments techniques, we show that countries with substantial government current expenditure have strong growth effects, which vary considerably across the nations.