Momentum profits in alternative stock market structures

Chelley-Steeley, P. and Siganos, A. (2008) Momentum profits in alternative stock market structures. Journal of Multinational Financial Management, 18(2), pp. 131-144. (doi:10.1016/j.mulfin.2007.05.002)

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Publisher's URL: http://dx.doi.org/10.1016/j.mulfin.2007.05.002

Abstract

The aim of this study is to examine the relationship between momentum profitability and the stock market trading mechanism and is motivated by recent changes to the trading systems that have taken place on the London Stock Exchange. Since 1975 the London stock market has employed three different trading systems: a floor based system, a computerized dealer system called SEAQ and the automated auction system SETS. Since each new trading system has reduced the level of execution costs, one might expect, a priori, the magnitude of momentum profits to decline with each amendment to the trading system. However, the opposite empirical result is found showing that shares trading on the automated system generate higher momentum profits than those trading on the floor system and companies trading on the SETS system display greater momentum profitability than those trading on SEAQ. Our empirical results concur with the theoretical findings of the trader's hesitation model of Du [Du, J., 2002. Heterogeneity in investor confidence and asset market under- and overreaction. Working paper] and the empirical findings of Arena et al. [Arena, M., Haggard, S., Yan, X., Price momentum and idiosyncratic volatility. Financial Review, in press].

Item Type:Articles
Keywords:Momentum; SETS; SEAQ
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Siganos, Dr Antonios
Authors: Chelley-Steeley, P., and Siganos, A.
Subjects:H Social Sciences > HF Commerce
H Social Sciences > HG Finance
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Journal of Multinational Financial Management
Publisher:Elesevier
ISSN:1042-444X
Copyright Holders:Copyright © 2008 Elsevier
First Published:First published in Journal of Multinational Financial Management 18(2):131-144
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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