Efficiency of the stock exchanges and merging markets: The liquidity study of the Helsinki Stock Exchange in 1999-2004
Kolula, Susanna (2008)
Kolula, Susanna
2008
Kuvaus
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Tiivistelmä
European stock exchanges have historically been local monopolies and thought as public entities. However, quite recently, the stock exchanges have also been thought as operative firms. Following this point of view, more attention is focused also to the efficiency of the stock exchanges. The competition between stock exchanges has increased and stock exchanges have come up with different kind of competitive strategies to survive in this battle. They are for example forming alliances, allowing remote access to their trading systems or even merging with each other.
This study is divided into two parts. In the first part, we introduce the common history of the development of the stock market in general, and summarize mergers, acquisitions and merger attempts in Europe. In this part, we also review factors, which are thought to have some effect to the efficiency of the stock exchanges in the relevant literature. In the second part, we study efficiency of the Helsinki Stock Exchange during the research period of 1999-2004. Two groups are categorized ac cording to the size of the company, the ten largest companies and the ten smallest companies. Since there is no single unambiguous measure for liquidity, two commonly used liquidity proxies, percentage bid-ask spread and trading volume in euros are used to measure the possible increase of the efficiency of the Helsinki Stock Exchange.
The results of the largest companies group are relatively predictable, the year 2004 seeming to be the most efficient year in the Helsinki Stock Exchange during our research period. However, the results of the smallest companies group are less consistent. Particularly according to the smallest companies percentage average bid-ask spread values, the years 1999 and 2000 seem to be the most efficient years.
This study is divided into two parts. In the first part, we introduce the common history of the development of the stock market in general, and summarize mergers, acquisitions and merger attempts in Europe. In this part, we also review factors, which are thought to have some effect to the efficiency of the stock exchanges in the relevant literature. In the second part, we study efficiency of the Helsinki Stock Exchange during the research period of 1999-2004. Two groups are categorized ac cording to the size of the company, the ten largest companies and the ten smallest companies. Since there is no single unambiguous measure for liquidity, two commonly used liquidity proxies, percentage bid-ask spread and trading volume in euros are used to measure the possible increase of the efficiency of the Helsinki Stock Exchange.
The results of the largest companies group are relatively predictable, the year 2004 seeming to be the most efficient year in the Helsinki Stock Exchange during our research period. However, the results of the smallest companies group are less consistent. Particularly according to the smallest companies percentage average bid-ask spread values, the years 1999 and 2000 seem to be the most efficient years.