Do Share Prices Matter?

13 Pages Posted: 4 Jan 2003

See all articles by Edward Alexander Dyl

Edward Alexander Dyl

University of Arizona

William B. Elliott

John Carroll University

John C. Handley

University of Melbourne - Department of Finance


This paper examines whether the cross sectional variation in Australian share prices is partially explained by measures of firm size and ownership characteristics in a manner that is consistent with firms behaving in accordance with Merton's (1987) model of capital market equilibrium with incomplete information. Based on a sample of firms whose shares were traded on the ASX during 1995, we show that firms largely owned by less wealthy shareholders tend to have low stock prices, although this relation is not linear. In addition, larger, better-known, firms tend to have higher stock prices. These findings are consistent with prior evidence from US markets, and suggest the existence of a shareholder clientele effect in Australia that is related to the share price of the underlying firm.

Suggested Citation

Dyl, Edward A. and Elliott, William B. and Handley, John C., Do Share Prices Matter?. Available at SSRN:

Edward A. Dyl (Contact Author)

University of Arizona ( email )

Department of Finance
Tucson, AZ 85721
United States
520-621-9534 (Phone)
520-621-1261 (Fax)

William B. Elliott

John Carroll University ( email )

University Heights, OH 44118
United States

John C. Handley

University of Melbourne - Department of Finance ( email )

Parkville, Victoria 3010 3010
(61) 3 8344 7663 (Phone)
(61) 3 8344 6914 (Fax)

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