Market Response to Liquidity Improvements: Evidence from Exchange Listings

Posted: 1 Feb 2000

See all articles by Elyas Elyasiani

Elyas Elyasiani

Temple University - Department of Finance

Shmuel Hauser

Ben-Gurion University of the Negev - School of Management; Government of the State of Israel - Israel Securities Authority

Beni Lauterbach

Bar-Ilan University - Graduate School of Business Administration; European Corporate Governance Institute (ECGI)

Abstract

The study examines a sample of 895 stocks that moved from Nasdaq to the New York Stock Exchange or to the American Stock Exchange between 1971 and 1994. We show how various measures of liquidity such as the bid-ask spread, trading volume, and stock price precision improve in somewhat different ways upon transfer to NYSE (Amex). We also find that reductions in trading costs (% spread) and in pricing error volatility (Hasbrouck's (1993) measure) can explain most of stock market's positive response to exchange listing. Thus, liquidity has many facets and cannot be represented by the bid-ask spread alone.

JEL Classification: G12

Suggested Citation

Elyasiani, Elyas and Hauser, Shmuel and Lauterbach, Beni, Market Response to Liquidity Improvements: Evidence from Exchange Listings. Financial Review, February 2000. Available at SSRN: https://ssrn.com/abstract=204748

Elyas Elyasiani

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-5881 (Phone)
215-204-5698 (Fax)

Shmuel Hauser

Ben-Gurion University of the Negev - School of Management ( email )

P.O. Box 653
Beer-Sheva 84105
Israel
+972 2 651 3939 (Phone)
+972 7 6472896 (Fax)

Government of the State of Israel - Israel Securities Authority

22 Kanfei Nesharim Street
Jerusalem 95464
Israel

Beni Lauterbach (Contact Author)

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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