When an Event is Not an Event: The Curious Case of an Emerging Market

Journal of Financial Economics, January 2000

Posted: 27 Jan 1999

See all articles by Utpal Bhattacharya

Utpal Bhattacharya

HKUST Business School

Hazem Daouk

Cornell University - School of Applied Economics and Management

Brian Jorgenson

Carreker-Antinori

Carl-Heinrich Kehr

BankBetriebsWirtschaft Jacob & Co. KG

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Abstract

Shares trading in the Bolsa Mexicana de Valores do not seem to react to company news. Using a sample of Mexican corporate news announcements from the period July 1994 to June 1997, this paper finds that there is nothing unusual about returns, volatility of returns, volume of trade or bid-ask spreads in the event window. This suggests one of five possibilities: our sample size is small; or markets are inefficient; or markets are efficient but the corporate news announcements are not value-relevant; or markets are efficient and corporate news announcements are value-relevant, but they have been fully anticipated; or markets are efficient and corporate news announcements are value-relevant, but unrestricted insider trading has caused prices to fully incorporate the information. A classification into A-shares (which only citizens may hold) and B-shares (which foreigners can hold) reveals that this lack of reaction is mostly concentrated in the A-shares, suggesting that foreigners are more surprised than the locals. This, and the result that the return volatility of A-shares leads return volatility of B-shares (but not strongly enough for there to exist trading rules to arbitrage it away), insinuate that it is insider trading that is responsible for a Mexican corporate news announcement to be a non-event.

The paper thus points toward a methodology for ranking emerging stock markets in terms of their "market integrity," an approach that can be used with the limited data available in such markets.

Note: This is a description of the paper and is not the actual abstract.

JEL Classification: G14, G15

Suggested Citation

Bhattacharya, Utpal and Daouk, Hazem and Jorgenson, Brian and Kehr, Carl-Heinrich, When an Event is Not an Event: The Curious Case of an Emerging Market. Journal of Financial Economics, January 2000, Available at SSRN: https://ssrn.com/abstract=146735

Utpal Bhattacharya (Contact Author)

HKUST Business School ( email )

Clear Water Bay
Kowloon
Hong Kong

Hazem Daouk

Cornell University - School of Applied Economics and Management ( email )

446 Warren Hall
Ithaca, NY 14853
United States
331-45-78-63-88 (Fax)

HOME PAGE: http://courses.cit.cornell.edu/hd35/

Brian Jorgenson

Carreker-Antinori ( email )

Suite 1100
Dallas, TX 75240
United States
913-269-9075 (Phone)
972-701-0758 (Fax)

Carl-Heinrich Kehr

BankBetriebsWirtschaft Jacob & Co. KG ( email )

Kreuzberger Ring 21
65205 Wiesbaden
Germany
49)(611)973300 (Phone)

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