Evidence of a Leadership Role in the Chilean Stock Exchanges

26 Pages Posted: 6 Jun 2001

See all articles by Franco Parisi

Franco Parisi

University of Chile

Lance A. Nail

University of Alabama at Birmingham - Department of Finance, Economics, and Quantitative Methods

Catherine Soto

University of Chile

Multiple version iconThere are 2 versions of this paper

Date Written: February 2001

Abstract

In our study of the two leading stock exchanges in Chile - the Santiago Stock Exchange (SSE) and the Electronic Stock Exchange (ESE) - we find that the SSE exhibits a leadership role over the ESE in terms of transmission of returns and volatility. These results indicate that prior empirical studies showing that the New York Stock Exchange leads other exchanges is a result of market structure factors rather than a "US effect". The factors that lead to a leadership role are deeper liquidity, more effective monitoring, and a greater concentration of speculators. Markets possessing these factors will be the first to attract investors and will lead other exchanges. Although the leadership role of the SSE creates a predictable flow of information between markets, the ability to create arbitrage opportunities is mitigated by transaction costs and the current order processing mechanism in Chile. However, our results suggest that a market's leadership could result in arbitrage opportunities in countries with lower transaction costs or different order-processing mechanisms.

Keywords: stock market leadership, transmission of volatility, contagion, Chile

JEL Classification: F21, F30, G15

Suggested Citation

Parisi, Franco and Nail, Lance A. and Soto, Catherine, Evidence of a Leadership Role in the Chilean Stock Exchanges (February 2001). Available at SSRN: https://ssrn.com/abstract=272358 or http://dx.doi.org/10.2139/ssrn.272358

Franco Parisi (Contact Author)

University of Chile ( email )

Department of Finance Oficina 1102
Santiago
Chile
+56 2 678-3366 (Phone)
+56 2 222-0639 (Fax)

Lance A. Nail

University of Alabama at Birmingham - Department of Finance, Economics, and Quantitative Methods ( email )

Birmingham, AL 35294
United States
205-934-8501 (Phone)
205.975.4427 (Fax)

Catherine Soto

University of Chile

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Register to save articles to
your library

Register

Paper statistics

Downloads
276
Abstract Views
2,342
rank
108,894
PlumX Metrics