Stock Exchange Mergers and Market Efficiency
Jae Kim () and
Etienne Redor ()
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Etienne Redor: Audencia Recherche - Audencia Business School
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The aim of this paper is to examine the positive and negative impacts of stock exchange mergers on the informational efficiency of the markets. We consider a range of factors in relation to the stock exchange merger, that can potentially affects market efficiency, after a merger. These factors include the maturity of the markets being merged, the size of the markets, and different types of mergers (developed markets versus developing markets; large stock exchange mergers versus small stock exchange mergers; and domestic stock exchange mergers versus cross-border stock exchange mergers). For this purpose, we use a time-varying return predictability test which allows us to detect periods of (in)efficiency, and thus to conduct a comparative analysis for pre-merger and post-merger periods. We find that increases in efficiency are less frequent than decreases in efficiency after a stock exchange merger. Finally, we provide the empirical evidence that the impact on efficiency depends on range of the characteristics of the merger: stock exchange's country's level of development, size, geographical diversification and industrial diversification.
Keywords: Martingale difference sequence; Stock exchange mergers; Market efficiency; Martingale difference sequence. (search for similar items in EconPapers)
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Journal Article: Stock exchange mergers and market efficiency (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-00940105
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