Could Mergers Become More Sustainable? A Study of the Stock Exchange Mergers of NASDAQ and OMX

Wenjing Xie, João Paulo Vieito, Ephraim Clark and Wing-Keung Wong
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Wenjing Xie: School of Economics and Finance, Shanghai International Studies University, Shanghai 200083, China
João Paulo Vieito: Escola Superior de Ciências Empresraiais, Instituto Politécnico de Viana do Castelo, 4930-600 Valença, Portugal

Sustainability, 2020, vol. 12, issue 20, 1-25

Abstract: This study investigates whether the merger of NASDAQ and OMX could reduce the portfolio diversification possibilities for stock market investors and whether it is necessary to implement national policies and international treaties for the sustainable development of financial markets. Our study is very important because some players in the stock markets have not yet realized that stock exchanges, during the last decades, have moved from government-owned or mutually-owned organizations to private companies, and, with several mergers having occurred, the market is tending gradually to behave like a monopoly. From our analysis, we conclude that increased volatility and reduced diversification opportunities are the results of an increase in the long-run comovement between each pair of indices in Nordic and Baltic stock markets (Denmark, Sweden, Finland, Estonia, Latvia, and Lithuania) and NASDAQ after the merger. We also find that the merger tends to improve the error-correction mechanism for NASDAQ so that it Granger-causes OMX, but OMX loses predictive power on NASDAQ after the merger. We conclude that the merger of NASDAQ and OMX reduces the diversification possibilities for stock market investors and our findings provide evidence to support the argument that it is important to implement national policies and international treaties for the sustainable development of financial markets.

Keywords: Stock exchange mergers; cointegration; Nordic and Baltic stock exchanges (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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