The Effect of Market Segmentation and Illiquidity on Asset Prices: Evidence from Exchange Listings

The Effect of Market Segmentation and Illiquidity on Asset Prices: Evidence from Exchange Listings ABSTRACT This article documents the effect on share value of listing on the New York Stock Exchange and reports the results of a joint test of Merton's (1987) investor recognition factor and Amihud and Mendelson's (1986) liquidity factor as explanations of the change in share value. We find that during the 1980s stocks earned abnormal returns of 5 percent in response to the listing announcement and that listing is associated with an increase in the number of shareholders and a reduction in bid‐ask spreads. Cross‐sectional regressions provide support for both investor recognition and liquidity as sources of value from exchange listing. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

The Effect of Market Segmentation and Illiquidity on Asset Prices: Evidence from Exchange Listings

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Publisher
Wiley
Copyright
1994 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
D.O.I.
10.1111/j.1540-6261.1994.tb05154.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This article documents the effect on share value of listing on the New York Stock Exchange and reports the results of a joint test of Merton's (1987) investor recognition factor and Amihud and Mendelson's (1986) liquidity factor as explanations of the change in share value. We find that during the 1980s stocks earned abnormal returns of 5 percent in response to the listing announcement and that listing is associated with an increase in the number of shareholders and a reduction in bid‐ask spreads. Cross‐sectional regressions provide support for both investor recognition and liquidity as sources of value from exchange listing.

Journal

The Journal of FinanceWiley

Published: Jun 1, 1994

References

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