The Microstructure of the Irish Stock Market

38 Pages Posted: 12 Apr 2005

See all articles by Patricia Chelley-Steeley

Patricia Chelley-Steeley

Aston University - Aston Business School

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Ho Chi Minh City University of Economics and Finance; Jiangxi University of Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2004

Abstract

This is the first paper that studies the microstructure of the Irish Stock Market empirically. The motivation for our work is that on 7th of June 2000 The Irish Stock Exchange adopted themodern pan European auction trading system Xetra. Prior to this the exchange utilised an antiquated floor based system. This was an important event for the market as a rich literature exists to suggest that the trading system exerts a strong influence over the behaviour of security returns. We apply the ICSS algorithm of Inclan and Tiao (1994) to discover whether the change to the trading system caused a shift in unconditional volatility at the time Xetra was introduced. We also apply a GARCH model and test for variance changes in the period after Xetra was introduced. Because the trading mechanism can influence volatility in a number of ways we also estimate the partial adjustment coefficients of the Amihud and Mendelson (1987) model prior and subsequent to the introduction of Xetra. We find no evidence of volatility changes associated with the introduction of Xetra. However we do find evidence of an increase in adjustment speeds after the introduction of Xetra.

Keywords: ICSS, Ireland, microstructure, trading system

JEL Classification: G00

Suggested Citation

Chelley-Steeley, Patricia and Lucey, Brian M., The Microstructure of the Irish Stock Market (June 2004). Available at SSRN: https://ssrn.com/abstract=686182 or http://dx.doi.org/10.2139/ssrn.686182

Patricia Chelley-Steeley

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen D├Čnh Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

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