The Rise and Fall of the Amex Emerging Company Marketplace

Posted: 24 Aug 1998

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business

James Angel

Georgetown University - Department of Finance

Abstract

In 1992, the AMEX launched the Emerging Company Marketplace (ECM) to trade the stocks of small but growing companies. After listing on the ECM, stocks experienced dramatic decreases in bid-ask spreads, but showed mixed results on price and trading volume. News coverage of the ECM stocks rose significantly. Yet few firms chose to list on the new ECM, and the AMEX closed it in 1995. What went wrong? A series of scandals tarred the image of the exchange. Furthermore, auction markets historically have not fared well against dealer markets for very small firms. For some companies, it is worthwhile to subsidize the distribution channel for their stock by listing in a higher transaction cost dealer market, which gives dealers incentive to publicize the firm.

JEL Classification: G10, G15

Suggested Citation

Aggarwal, Reena and Angel, James J., The Rise and Fall of the Amex Emerging Company Marketplace. Available at SSRN: https://ssrn.com/abstract=6724

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3784 (Phone)
202-687-0798 (Fax)

HOME PAGE: http://explore.georgetown.edu/people/aggarwal/

James J. Angel (Contact Author)

Georgetown University - Department of Finance ( email )

McDonough School of Business
Washington, DC 20057
United States
202-687-3765 (Phone)
202-687-4031 (Fax)

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