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Essays on Balkan frontier stock markets
Stockholm University, Faculty of Social Sciences, Stockholm Business School.ORCID iD: 0000-0002-1840-6418
2014 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This dissertation consists of four chapters dealing with Balkan frontier markets, their design and performance. Chapter I provides an introduction to these markets and presents additional information necessary for the reader to understand these markets. Chapters II-IV present empirical research related to topics of: privatization, liquidity, liquidity premium, order book transparency, and price discovery.

Chapter II studies the privatization of several large state-owned enterprises, in Croatia and Serbia, and the effect that their subsequent listing had on the respective market’s liquidity. The listings are found not to have a systematic effect on market liquidity despite the differences in the design of the privatisation programme between Croatia and Serbia.

Chapter III studies the liquidity premium. By forming portfolios based on liquidity levels and subsequently obtaining the monthly returns of those portfolios a liquidity premium is shown to exist in these markets. However, in the case of Romania a negative liquidity premium is found. Formal asset pricing models and tests show that liquidity levels are an important factor in explaining portfolio returns in these markets.

Chapter IV looks into the market microstructure of these markets. A difference in the level of pre-opening order book transparency provides an opportunity to test whether this difference affects the efficiency of the opening price in these Balkan frontier markets. It is found that in Bulgaria, which has an opaque pre-opening order book, the levels of price discovery at the opening of the trading period is significantly higher than in other markets. Similarly, in Serbia which has a transparent pre-opening order book the level of price discovery at the opening of trading is lower than in other markets. Finally a decrease in the level of transparency of the pre-opening order book in Bulgaria has led to an increase in the level of price discovery at the opening of trading.

Abstract [sv]

Denna avhandling består av fyra kapitel med fokus på frontier aktiemarknader i Balkan, deras design och prestanda. Kapitel I ger en introduktion till dessa marknader och ger information nödvändig för läsaren att förstå dem. Kapitel II-IV är empiriska studier inom ämnena: privatisering, likviditet, likviditets premie, orderbokstransparens, samt prisbildning.

Kapitel II studerar privatisering av flera stora statsägda företag i Kroatien och Serbien, och effekten börsnoteringar ger på likviditet inom respektive aktiemarknad. Resultaten visar att dessa noteringar inte hade en systematisk effekt på marknadens likviditet, trots skillnader i design av privatiseringsprogram mellan Kroatien och Serbien.

Kapitel III fokuserar på likviditetspremie. Genom portföljbildning baserad på likviditetsnivå och därefter erhållande av månatliga portföljavkastningar visar studien att likviditetspremie existerar i dessa marknader. I fallet Rumänien har dock en negativ likviditetspremie påvisats. Formel asset pricing modeller och tester visar att likviditetsnivåer är viktiga faktorer när man förklarar portföljavkastningar i de studerade marknaderna.

Kapitel IV fokuserar på marknadens mikrostruktur. Skillnad i transparens av orderbok mellan marknaderna i perioden innan öppning av handel ger möjlighet att testa om denna skillnad påverkar effektivitet, av öppningspriset i dessa frontier marknader i Balkan. Resultat visar att i Bulgarien, som har opak orderbok under period innan öppning av handel, visar signifikant högre nivå i effektivitet av prisbildning än de andra marknaderna. Serbien som har en transparant orderbok under period innan öppning av handel, visar signifikant lägre nivå i effektivitet av prisbildning än de andra marknaderna. Slutligen, en minskad transparens av orderbok i perioden innan öppning av handel i Bulgarien har lett till en mer effektiv prisbildning vid öppning av handel.

Place, publisher, year, edition, pages
Stockholm: Stockholm Business School, Stockholm University , 2014. , p. 38
Keyword [en]
frontier stock markets, privatisation, liquidity, liquidity premium, order book, transparency, price discovery
Keyword [sv]
frontier aktiemarknad, privatisering, likviditet, likviditetspremie, orderbok, transparens, prisbildning
National Category
Business Administration
Research subject
Business Administration
Identifiers
URN: urn:nbn:se:su:diva-109174ISBN: 978-91-7649-055-6 (print)OAI: oai:DiVA.org:su-109174DiVA, id: diva2:763682
Public defence
2014-12-18, Gröjersalen, hus 3, Kräftriket, Roslagsvägen 101, Stockholm, 13:00 (English)
Opponent
Supervisors
Note

At the time of the doctoral defense, the following papers were unpublished and had a status as follows: Paper 1-3: Manuscript.

Available from: 2014-11-26 Created: 2014-11-14 Last updated: 2014-12-17Bibliographically approved
List of papers
1. Privatisation and liquidity in frontier markets
Open this publication in new window or tab >>Privatisation and liquidity in frontier markets
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Two frontier markets in recent years privatised and listed several of their largest companies. Despite the attention that these listings obtained, and the expectation of their effect on the market, they were unsuccessful in systematically improving liquidity of the market in Croatia and Serbia. Sporadic effects on liquidity (both liquidity improving and liquidity deteriorating) have been found, depending on the liquidity measure employed and the empiric method used, but there has been no systematic effect of these several new listings on the liquidity of already listed stocks.

Keyword
privatisation, frontier stock market, liquidity
National Category
Business Administration
Identifiers
urn:nbn:se:su:diva-109169 (URN)
Available from: 2014-11-14 Created: 2014-11-14 Last updated: 2014-11-17
2. Liquidity premium in the Balkan frontier stock markets
Open this publication in new window or tab >>Liquidity premium in the Balkan frontier stock markets
(English)Manuscript (preprint) (Other academic)
Abstract [en]

The effect of liquidity level on stock returns is studied for four Balkan frontier markets. Stocks sorted into portfolios based on liquidity level show significant premium for holding illiquid stocks in three of the four studied markets. A puzzling result in Romania is the negative liquidity premium. The CAPM as well as augmented CAPM (augmented with liquidity, size factor and momentum factor) are found to perform very well in explaining the portfolio returns in the studied Balkan frontier markets. Results indicate that investors demand a liquidity level premium for holding stocks that have high transaction costs and/or are infrequently traded.

Keyword
frontier stock market, liquidity, liquidity premium
National Category
Business Administration
Identifiers
urn:nbn:se:su:diva-109170 (URN)
Available from: 2014-11-14 Created: 2014-11-14 Last updated: 2014-11-17
3. Order-book transparency and pre-trading period price discovery
Open this publication in new window or tab >>Order-book transparency and pre-trading period price discovery
(English)Manuscript (preprint) (Other academic)
Abstract [en]

I investigate the importance of the pre-trading period and opening call auction on the price discovery process, and how this process is affected by order-book transparency during the pre-trading period. Results show that the pre-trading period is an integral part of the trading day for the studied stocks since a large part of the day’s price discovery occurs by the conclusion of this period. The visibility of the orderbook and no possible presence of iceberg orders during the pre-trading periodhave a negative impact on the level of price discovery. Decreasing transparency (in either of these two aspects or jointly) is shown to have a positive effecton the amount of pre-trading period price discovery. Finally a change in the visibility of the pre-trading order book in one of the studied markets confirms that reduction in visibility leads to higher price discovery during the pre-trading period.

Keyword
order book, transparency, price discovery, pre-opening period, frontier stock market
National Category
Business Administration
Identifiers
urn:nbn:se:su:diva-109171 (URN)
Available from: 2014-11-14 Created: 2014-11-14 Last updated: 2014-11-17

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