Essays on equity prices and market structures

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Title: Essays on equity prices and market structures
Author: Wu, Juan
Abstract: In the first essay , we provide new evidence on the relationship between order flow and prices , an issue that is central to asset pricing and market microstructure . We examine proprietary data on a broad panel of NYSE -listed stocks that reveal daily order imbalances by institutions , individuals , and market makers . We can further differentiate regular institutional trades from institutional program trades . Our results indicate that order imbalances from different trader types play distinctly different roles in price formation . Institutions and individuals are contrarians with respect to previous -day returns but differ in the effect their order imbalances have on contemporaneous returns . Institutional imbalances are positively related to contemporaneous returns , and cross -sectional evidence suggests this relationship is likely to be the result of firm -specific information institutions have . Individuals , specialists , and other market makers appear to provide liquidity to these actively trading institutions . Our results also suggest a special role for institutional program trades . Institutions choose program trades when they have no firm -specific information and can afford to trade passively . As a result , program trades provide liquidity to the market . Finally , both institutional non -program and individual imbalances have predictive power for next -day returns . In the second essay , based on daily shorting flow data for a large sample of NYSE -listed stocks , we show that short sellers enhance the relative efficiency of transaction prices . We also provide new evidence on the recent suspension of the Uptick Rule for Regulation SHO Pilot stocks . Relative to matched control stocks , pilot stocks experience some improvement in price efficiency associated with increased shorting activity after the tick test was suspended . The third essay studies demutualization of stock exchanges . Using panel data on 132 major stock exchanges in 114 countries from 1990 to 2003 , we examine the effect of demutualization on an exchange ?s performance in its primary product markets : trading and listings . We document some evidence that demutualization is associated with improved competitiveness in attracting trading volume . Results on listings following demutualization are weak .
URI: http : / /hdl .handle .net /1969 .1 /ETD -TAMU -1509
Date: 2009-05-15


Essays on equity prices and market structures. Available electronically from http : / /hdl .handle .net /1969 .1 /ETD -TAMU -1509 .

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