International Stock Exchanges Research Articles

International stock exchange listing and the reduction of political risk

AbstractThe impending 1997 assimilation into the People's Republic of China made the 1980s a challenging period for Hong Kong, one in which Kong Kong‐based companies relocated their corporate domiciles to other countries as political insurance. International listing, however, is another way for companies to reduce political risk. This paper examines the post‐1985 effects of Hong Kong‐based company stocks being quoted on London's International Stock Exchange. We document that there is no price effect for these companies after the first trading day and a significant increase in the average trading volume surrounding the event day. This may be attributed to the London market makers who build up their stakes before the listing and who unwind their positions in the Hong Kong market after the event day. We also find that there is, on average, a decrease in systematic risk of these companies after being traded on the London market. Furthermore, the evidence shows that there is an increase in systematic risk for companies that are not listed in London after 4 June 1989, however, not for those London‐listed Hong Kong companies. The results constitute evidence to support the inference that there is a reduction of local political risk for internationally listed companies.

An objective Bayesian analysis of common stochastic trends in international stock prices and exchange rates : Gary Koop

An objective Bayesian analysis of common stochastic trends in international stock prices and exchange rates : Gary Koop

Valuation effects of international stock exchange listings

A comprehensive data set consisting of 346 U.S. firm stock listings on ten different stock exchanges is examined in order to determine the valuation consequences of listing on a foreign stock exchange. For the sample of U.S. firms listing abroad, abnormal returns in U.S. trading were: (1) positive around the date of acceptance on the foreign exchange; (2) negative on the first trading day; and (3) negative in the post-listing period for firms listing on the Tokyo and Basel exchanges. Tests for the equality of stock return variances between event periods and market model estimation periods failed to reveal a definitive impact.

An objective Bayesian analysis of common stochastic trends in international stock prices and exchange rates

This paper uses Bayesian methods to analyze unit root and cointegration properties of two different finance data sets. Avoiding the use of subjective prior information, the paper surveys and utilizes several different objective Bayesian methodologies in an investigation of common stochastic trends in international stock markets and in spot and forward exchange rates for several different countries.

The Appeal of an Article 177 EEC Referral

Article 177 of the Treaty of Rome provides a vital mechanism through which national courts and tribunals can obtain authoritative rulings on the interpretation and, where applicable, the validity of a Community law measure which has arisen in proceedings before them. A request to resort to this mechanism, however, can pose a dilemma for the court or tribunal from whose decision there is a right of appeal within the domestic legal order. It is under no obligation to refer. If, for example, such a court decided to refer, it may well be imposing further delay, expense and uncertainty on the litigants, not to mention the diminution in its own authority that may be implicit in such a move. If, on the other hand, it opts to interpret the Community law measure itself, the risk of error will always be very real as these measures are framed in the civil law mode, while a British court is versed in the common law approach to statutory interpretation. A wrong interpretation would not only be a direct source of injustice to the litigants involved, it could also burden them with the delay and expense of domestic appeals and the likelihood of an ultimate referral to the European Court of Justice. If the error was not corrected, either through appeal or referral, the result would be that the Community law measure in question would be applied differently in the United Kingdom compared to the rest of the Community. Given the options, it would be understandable if courts preferred a referral where there was the least doubt about the correct interpretation of the measure in question. The jurisprudence of the European Court of Justice offers strong encouragement to national courts to exercise their power of referral liberally. English courts, by comparison, have tended to follow the lead of Lord Denning in H.P. Bulmer v J. Bollinger SA,2 where he exhorts them to rely less on the discretion and more on their capacity to interpret Community law themselves.3 The recent decision of the Court of Appeal in R v International Stock Exchange of the United Kingdom and the Republic of Ireland, ex parte Else and Others4 (the Stock Exchange case), however, may herald a change in this approach. The judgment of Sir Thomas Bingham MR in this case offers a significant reformulation of Lord Denning's principles governing how a lower court should approach the issue of a referral under Article 177. The apparent effect of this reformulation is to weight the Article 177 procedure heavily in favour of referrals being granted by lower courts. Paradoxically, it may also enhance the prospects of a lower court's decision to refer being overturned on appeal. Indeed, the Stock Exchange case itself happens to be the only reported example of such an occurrence to date.

International Stock Exchange Linkages The Boston Stock Exchange and the Montreal Exchange

Cet article examine la mise en oeuvre d'un reseau electronique entre la Bourse de Boston et la Bourse de Montreal et les retombees d'un tel lien, y compris les questions administratives. La plus grande efficacite de ces bourses est le resultat d'une plus grande concurrence du point de vue du prix, du produit, et de l'espace.

The Pricing of Initial Offerings of Privatised Companies on the London Stock Exchange

Abstract This paper investigates UK privatisation issues as initial public offerings (IPOs) of equities on the International Stock Exchange (London). Excess returns on such issues are compared with private sector initial public offerings. The results, which are unaffected by firm size and underwriting commission, indicate that, on an ex post basis, the issues provide excess returns above those of private sector firms on average by about 31% over a 32-week period. None of the existing theories of underpricing of IPOs is consistent with our results which imply wealth transfer to those who acquired the shares in privatised issues. After-market pricing was, however, found to be consistent with secondary market efficiency.

The Stock Exchange after the Big Bang

The author describes the changes in the London International Stock Exchange since the ‘Big Bang’ of 1986, which has brought it into the field of information technology and systems with concomitant costs and risks. As a result the Exchange is more concerned with planning than ever before.

The Expected Return to Equity and International Asset Prices

This paper is concerned with empirical measurement, analysis, and comparison of the returns expected by investors in U. S., German, French and Japanese equity markets. The expedited return to equity is a pivotal concept in capital market theory because of the concern of this theory with analyzing relationships between expected returns to the general market and expected returns to individual securities. Because the expected equity returns are not directly observable, the approach almost uniformly taken in the empirical testing of capital market theory is to make additional behavioral assumptions beyond those contained in the basic theory that enable it to be translated into an analysis of market relationships among ex-post returns. Empirical tests then become tests of both the basic theory and the appended assumptions. A new approach to the empirical testing of capital market relationships is to develop empirical approximations to the returns expected in the equity market, and to employ these expectational measures to directly test capital market relationships. This paper formulates and examines this approach. Empirical approximations of the expected equity return for a representative group of major international stock exchanges are formulated, estimated, and analyzed, leading to a direct test of the International Asset Pricing model in its original form.