Stock Exchange Mergers and Market EfficiencyReport as inadecuate

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1 Audencia Recherche 2 LEMNA - Laboratoire d-économie et de management de Nantes Atlantique 3 School of Economics and Finance

Abstract : 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 inefficiency, 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.

Author: Amélie Charles - Olivier Darné - Jae H. Kim - Etienne Redor -



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