A Worldwide Examination of Exchange Market Quality: Greater Integrity Increases Market Efficiency
Frederick Harris () and
Journal of Business Ethics, 2015, vol. 132, issue 1, 147-170
We develop a framework for assessing security market quality (MQ), relating five elements of market design to three metrics of market integrity and two metrics of market efficiency. We empirically implement this integrity–efficiency MQ framework by testing a hypothesis that trade-based ramping manipulation at the close (MTC) raises execution costs on 24 security markets worldwide. Estimating a simultaneous equations model of ramping incidence, spreads, and the probability of deploying real-time surveillance (RTS), we show that quoted bid-ask spreads are positively related to the incidence of MTC across seven liquidity deciles. The magnitude is economically significant; improving market integrity by cutting MTC in half reduces spreads 6–11 %. Allowing direct market access in conjunction with RTS, conducting auctions at the close, and developing regulations that require surveillance, all reduce MTC and thereby lower spreads, assuring better market integrity and enhancing market efficiency. Introducing circuit breakers or prohibiting shorts poses integrity–efficiency tradeoffs. Copyright Springer Science+Business Media Dordrecht 2015
Keywords: Market integrity; Business ethics; Security market quality; Market manipulation; G28; G2 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:jbuset:v:132:y:2015:i:1:p:147-170
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2
Access Statistics for this article
Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman
More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().