We study a sample of Paris Bourse stocks that were transferred between call trading and continuous trading. Consistent with the results of Amihud et al. (J. Financial Econom. 45 (1997) 365), we find that frequently-traded stocks that are transferred from call trading to continuous trading experience, on average, liquidity improvements that are positively associated with price appreciation. We also find that infrequently-traded stocks that are transferred from continuous trading to call trading experience price and liquidity declines. Our results suggest that continuous markets offer better liquidity for frequently-traded stocks, but call markets do not offer better liquidity for infrequently-traded stocks. Our results support the Amihud and Mendelson (J. Financial Econom. 17 (1986) 223) assertion that there is a direct link between market microstructure and firm value.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics