The Effect of Regulation Fair Disclosure on Market Integration
The International Journal of Business and Finance Research, v. 8 (4) p. 43-62, 2014
20 Pages Posted: 12 Dec 2014
Date Written: 2014
The recent market crises have focused interest on methods to improve the functioning of financial markets. Before implementing new regulations, it is necessary to evaluate the effects of previous regulations. Regulatory changes such as Fair Disclosure have an effect on information dissemination and price discovery. This paper uses the information share of individual markets, to measure changes in the information contribution of markets before and after implementation of Regulation Fair Disclosure. Most of the existing studies focus on the price discovery process and the information contribution or share of the individual markets. This paper uses this information share as a metric to test the effect of a particular regulation. Employing cointegration analysis, this study measures the changes in the information share, impulse response functions, and tests whether Regulation Fair Disclosure has achieved its intended goal of greater informational parity and market integration. Results show that Fair Disclosure has increased the information share of satellite markets and achieved greater market integration.
Keywords: Market Integration, Information Share, Regulation Fair Disclosure, Cointegration, Informational Efficiency, Market Efficiency
JEL Classification: G, G12, G14, G18, G19
Suggested Citation: Suggested Citation