There has been considerable interest among market participants, market regulators and academics in the pricing of stock index futures contracts. Academic research in this area has been motivated by several considerations. First, the utility of these contracts for risk allocation and price discovery depends on the efficiency with which they are priced relative to the underlying index. Second, it has been widely believed that they have adverse impact on price dynamics in the stock market. Third, and most important, stock index futures offer the possibility of directly studying the economics of arbitrage in the context of market microstructure. This dissertation extends the theoretical framework on stock index futures pricing in two directions. First, within the static cost of carry framework, it generalises the forward pricing formula by allowing for cash market settlement procedures. Second, it shows that in the presence of arbitrage related transaction costs, the time series of stock index futures "mispricing" can be modelled as a threshold autoregressive (TAR) process, a piecewise linear autoregressive process in which the process parameters are path dependent. The TAR model is potentially attractive for many financial applications and this dissertation appears to be the first use of the TAR model in finance. This dissertation also provides substantial and significant new empirical evidence relevant to the theoretical issues involved. Inter-alia, it analyses several important aspects not adequately examined in past research, and it utilises the unique microstructural features of the London stock market to explore several major theoretical issues. The empirical analysis is based mainly on about four years of "time and sales" transactions data from the London International Financial Futures Exchange together with synchronous hourly cash index data.

This paper analyses three aspects of the share market operated by the Lima Stock Exchange: (i) the short-term relationship between the pricing, direction and volume of order flows; (ii) the components of the spread and the equilibrium point of the limit order book per share, and (iii) the pricing, order direction and trading volume dynamic resulting from shocks in the same variables when lagged. The econometric results for intraday data from 2012 show that the short-run dynamic of the most and least liquid shares in the General Index of the Lima Stock Exchange is explained by the direction of order flow, whose price impact is temporary in both cases.

MCom (Research) , Faculty of Commerce, Law and Management, University of the Witwatersrand, 2007 / The purpose of this dissertation is to motivate, construct and test the suitability of the Fama and French (1993) three-factor model in pricing equities listed on the Johannesburg Stock Exchange. Before this can be achieved, however, the existence of the size and the value effects needs to be established, and their resistance to risk adjustment with traditional asset pricing models needs to be ascertained. Once, these two empirical facts are documented, the three-factor model is built and tested. Results of Fama and French (1992) can be replicated on the Johannesburg Stock Exchange in that a firm‟s size and its value-growth indicator have reliable power to forecast stock returns. However, the value effect and, in particular, the size effect, attenuate after market microstructure is controlled for. Both effects are found to be independent of one another and the book-to-market ratio is found to be the best value-growth indicator. The static CAPM and an APT variant cannot explain the size and the value effects. This result is robust to time-series and cross-sectional tests. The three factor model of Fama and French (1993), and its variant, are constructed. The models can capture a substantial amount of time-series variation in most assets. When applied to the size and book-to-market sorted portfolios, they are not rejected in the vast majority of asset pricing tests. In tests on ungrouped data, the three factor model can explain the value effect, but not the size effect. However, in cross-sectional tests that use the size and book-to-market sorted portfolios as well as industry portfolios, the pricing errors of the three factor model are not substantially different from the ones obtained from the static CAPM.

Master of Commerce - Accounting There are 1 files which have been withheld at the author's request. / Since the identification and documentation of a day-of-the-week effect, it has captured imagination of the investing public and the attention of researchers. Indeed a significant amount of research has been dedicated towards the day-of-the-week effect. Until recently, the results of such research were consistent in that the evidence seemed to indicate that a day-of-the-week effect may indeed exist throughout the world. More recent studies have, however, produced different results and a second body of evidence is developing which indicates that the day-of-the week effect is dwindling. Attempts by researchers to attribute the day-of-the week effect to the settlement practices of various exchanges have met with limited success. This study argues that one would expect traded prices on an exchange to incorporate an adjustment for the delay between transacting and settlement. A model is formulated to adjust the mean daily returns on the exchange for the particular exchange’s settlement practice. This model is tested against historic price data from the Johannesburg Stock Exchange. The evidence presented does not support the notion that the traded prices are adjusted for the delay between the transaction and the settlement, the overall conclusion is that the settlement effect may represent a Johannesburg Stock Exchange inefficiency, though the size and significance of the effect has decreased in recent times

We employ the Reuters database to compare execution costs for 2,330 matched-pair securities across the top 7 equity markets in the Dow Jones STOXX Global 1800 Index. This sample encompasses a wide variety of thirteen market design features. In addition, we investigate execution costs well beyond the most heavily traded stocks to include equities in the sixth through tenth deciles of traded value. Our findings indicate that full transparency of the limit order book to investors and a composite of unique NYSE features (but not the presence of the crowd) unequivocally reduce effective spreads. In contrast, a fully transparent limit order book revealed to brokers, the presence of a market maker, or the mixture of execution systems present on the LSE sharply increase effective spreads in both thickly and thinly-traded stocks. The effect of a physical trading floor is statistically significant but relatively small; it increases effective spreads slightly for thickly-traded firms, and reduces them for thinly-traded stocks. The findings for price impact are the same with three exceptions. First, the presence of a trading floor increases costs, dramatically so for thinlytraded stocks. Second, a fully transparent limit order book for brokers raises price impact for thickly traded stocks, but lowers price impacts for thinly traded firms. Third, in thinly-traded stocks, London???s hybrid market decreases price impact, and in thickly-traded stocks, crowd trading on the NYSE and full transparency to investors decrease price impact. Finally, the results for realised spread are essentially the same as those for effective spread, with the exception that the effect of the presence of a trading floor is to reduce realised spreads. Overall, the London Stock Exchange is the highest execution cost market, and the NYSE is the lowest. This research includes a market-specific study of the effect on execution cost of the Liquidity Provider of Euronext Paris. Euronext Paris affords a natural experimental research design because a third of firms have Liquidity Providers and two thirds do not. Results indicate quoted spreads, effective spreads and realized spreads are significantly affected by the presence of a Liquidity Provider, but price impacts are not. On the one hand, this suggests that the thickly-traded stocks where the Liquidity Providers are prohibited have sufficient liquidity in their absence. On the other hand however, liquidity providers on Euronext Paris reduce effective and realised spreads in essentially all stocks. This finding suggests that the limit order book refreshes much more quickly after developing an imbalance of large size orders when Liquidity Providers can facilitate other liquidity suppliers in assessing picking off risk. The Liquidity Provider increases quoted spreads for thickly-traded firms from the first three traded value deciles while reducing quoted spreads for the lower deciles.

We employ the Reuters database to compare execution costs for 2,330 matched-pair securities across the top 7 equity markets in the Dow Jones STOXX Global 1800 Index. This sample encompasses a wide variety of thirteen market design features. In addition, we investigate execution costs well beyond the most heavily traded stocks to include equities in the sixth through tenth deciles of traded value. Our findings indicate that full transparency of the limit order book to investors and a composite of unique NYSE features (but not the presence of the crowd) unequivocally reduce effective spreads. In contrast, a fully transparent limit order book revealed to brokers, the presence of a market maker, or the mixture of execution systems present on the LSE sharply increase effective spreads in both thickly and thinly-traded stocks. The effect of a physical trading floor is statistically significant but relatively small; it increases effective spreads slightly for thickly-traded firms, and reduces them for thinly-traded stocks. The findings for price impact are the same with three exceptions. First, the presence of a trading floor increases costs, dramatically so for thinlytraded stocks. Second, a fully transparent limit order book for brokers raises price impact for thickly traded stocks, but lowers price impacts for thinly traded firms. Third, in thinly-traded stocks, London???s hybrid market decreases price impact, and in thickly-traded stocks, crowd trading on the NYSE and full transparency to investors decrease price impact. Finally, the results for realised spread are essentially the same as those for effective spread, with the exception that the effect of the presence of a trading floor is to reduce realised spreads. Overall, the London Stock Exchange is the highest execution cost market, and the NYSE is the lowest. This research includes a market-specific study of the effect on execution cost of the Liquidity Provider of Euronext Paris. Euronext Paris affords a natural experimental research design because a third of firms have Liquidity Providers and two thirds do not. Results indicate quoted spreads, effective spreads and realized spreads are significantly affected by the presence of a Liquidity Provider, but price impacts are not. On the one hand, this suggests that the thickly-traded stocks where the Liquidity Providers are prohibited have sufficient liquidity in their absence. On the other hand however, liquidity providers on Euronext Paris reduce effective and realised spreads in essentially all stocks. This finding suggests that the limit order book refreshes much more quickly after developing an imbalance of large size orders when Liquidity Providers can facilitate other liquidity suppliers in assessing picking off risk. The Liquidity Provider increases quoted spreads for thickly-traded firms from the first three traded value deciles while reducing quoted spreads for the lower deciles.

We employ the Reuters database to compare execution costs for 2,330 matched-pair securities across the top 7 equity markets in the Dow Jones STOXX Global 1800 Index. This sample encompasses a wide variety of thirteen market design features. In addition, we investigate execution costs well beyond the most heavily traded stocks to include equities in the sixth through tenth deciles of traded value. Our findings indicate that full transparency of the limit order book to investors and a composite of unique NYSE features (but not the presence of the crowd) unequivocally reduce effective spreads. In contrast, a fully transparent limit order book revealed to brokers, the presence of a market maker, or the mixture of execution systems present on the LSE sharply increase effective spreads in both thickly and thinly-traded stocks. The effect of a physical trading floor is statistically significant but relatively small; it increases effective spreads slightly for thickly-traded firms, and reduces them for thinly-traded stocks. The findings for price impact are the same with three exceptions. First, the presence of a trading floor increases costs, dramatically so for thinlytraded stocks. Second, a fully transparent limit order book for brokers raises price impact for thickly traded stocks, but lowers price impacts for thinly traded firms. Third, in thinly-traded stocks, London???s hybrid market decreases price impact, and in thickly-traded stocks, crowd trading on the NYSE and full transparency to investors decrease price impact. Finally, the results for realised spread are essentially the same as those for effective spread, with the exception that the effect of the presence of a trading floor is to reduce realised spreads. Overall, the London Stock Exchange is the highest execution cost market, and the NYSE is the lowest. This research includes a market-specific study of the effect on execution cost of the Liquidity Provider of Euronext Paris. Euronext Paris affords a natural experimental research design because a third of firms have Liquidity Providers and two thirds do not. Results indicate quoted spreads, effective spreads and realized spreads are significantly affected by the presence of a Liquidity Provider, but price impacts are not. On the one hand, this suggests that the thickly-traded stocks where the Liquidity Providers are prohibited have sufficient liquidity in their absence. On the other hand however, liquidity providers on Euronext Paris reduce effective and realised spreads in essentially all stocks. This finding suggests that the limit order book refreshes much more quickly after developing an imbalance of large size orders when Liquidity Providers can facilitate other liquidity suppliers in assessing picking off risk. The Liquidity Provider increases quoted spreads for thickly-traded firms from the first three traded value deciles while reducing quoted spreads for the lower deciles.

The aim of this thesis is to compile a glossary of technical terms relevant to stock exchange mergers and alliances. Since technical communication can only be described meaningfully in the context of technical information, technical knowledge, and terminology, judgmental analysis will be applied to the literature on stock exchange mergers and alliances to identify management theories that are able to explain stock exchange mergers and alliances. One aim is to find out which general theories on mergers and alliances have a high explanatory value for stock exchange cooperation. In the first part of the thesis, the stock exchange world is examined. First a general overview of the theory of corporate growth is given next the changes in the environment of stock exchanges are examined. In the analytical part, fourteen general management theories are applied to stock exchange cooperation. The criteria used to identify the explanatory value of the different theories are the critical success factors of stock exchanges identified in the first part of the thesis. A point system is introduced in order to make the results of the analysis of the different theories more comparable. The final part of the paper consists of an English-German glossary containing the relevant technical terms of stock exchange mergers and alliances. (author's abstract)

We employ the Reuters database to compare execution costs for 2,330 matched-pair securities across the top 7 equity markets in the Dow Jones STOXX Global 1800 Index. This sample encompasses a wide variety of thirteen market design features. In addition, we investigate execution costs well beyond the most heavily traded stocks to include equities in the sixth through tenth deciles of traded value. Our findings indicate that full transparency of the limit order book to investors and a composite of unique NYSE features (but not the presence of the crowd) unequivocally reduce effective spreads. In contrast, a fully transparent limit order book revealed to brokers, the presence of a market maker, or the mixture of execution systems present on the LSE sharply increase effective spreads in both thickly and thinly-traded stocks. The effect of a physical trading floor is statistically significant but relatively small; it increases effective spreads slightly for thickly-traded firms, and reduces them for thinly-traded stocks. The findings for price impact are the same with three exceptions. First, the presence of a trading floor increases costs, dramatically so for thinlytraded stocks. Second, a fully transparent limit order book for brokers raises price impact for thickly traded stocks, but lowers price impacts for thinly traded firms. Third, in thinly-traded stocks, London???s hybrid market decreases price impact, and in thickly-traded stocks, crowd trading on the NYSE and full transparency to investors decrease price impact. Finally, the results for realised spread are essentially the same as those for effective spread, with the exception that the effect of the presence of a trading floor is to reduce realised spreads. Overall, the London Stock Exchange is the highest execution cost market, and the NYSE is the lowest. This research includes a market-specific study of the effect on execution cost of the Liquidity Provider of Euronext Paris. Euronext Paris affords a natural experimental research design because a third of firms have Liquidity Providers and two thirds do not. Results indicate quoted spreads, effective spreads and realized spreads are significantly affected by the presence of a Liquidity Provider, but price impacts are not. On the one hand, this suggests that the thickly-traded stocks where the Liquidity Providers are prohibited have sufficient liquidity in their absence. On the other hand however, liquidity providers on Euronext Paris reduce effective and realised spreads in essentially all stocks. This finding suggests that the limit order book refreshes much more quickly after developing an imbalance of large size orders when Liquidity Providers can facilitate other liquidity suppliers in assessing picking off risk. The Liquidity Provider increases quoted spreads for thickly-traded firms from the first three traded value deciles while reducing quoted spreads for the lower deciles.

This dissertation analyzes the efficiency of the Bombay Stock Exchange (BSE) and the relationship of stock return patterns on the BSE with those of the New York Stock Exchange (NYSE). The data includes daily closing values of the BSE and S&P 500 Indexes for the period 1979-1990 and bi-weekly closing prices on 27 of the most active stocks on the BSE for the period 1980-1990.