Inefficient Stock Market Generated by Adverse Information

11 Pages Posted: 18 Mar 2008

Abstract

This paper aims to search the high volatility of stock prices in stock market crises produced by adverse information, throughout investigating the links between stock price volatility and the institutional features of the major stock exchanges as exist in practice. The study finds that the causes of stock market crises reside in First, the noise trading and overreaction of stock traders. Second the increasing linkage among the international stock markets. Third, the effect of the option markets. Fourth some of the present institutional features of the stock market structure.

The paper suggests reforms to curb the possible causes of stock market instability. The reforms relate to regulations concerning bearer share certificate, outside stock trading, controlling of high price fluctuations, price quotations, and stock dealing methods and cash settlement systems. In addition, the paper discussed the holding own share's model as a new financial instrument to support the stock market price in case of market crises.

Keywords: inefficien market, stock market, adverse information

JEL Classification: G10, G14, G15

Suggested Citation

Sabri, Nidal Rashid, Inefficient Stock Market Generated by Adverse Information. Available at SSRN: https://ssrn.com/abstract=1106568 or http://dx.doi.org/10.2139/ssrn.1106568

Nidal Rashid Sabri (Contact Author)

Birzeit University ( email )

Birzeit, West Bank
Palestine
972 2 2810396 (Phone)
972 2 2982963 (Fax)

HOME PAGE: http://home.birzeit.edu/commerce/sabri

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