Adverse selection, brokerage coverage, and trading activity on the Tokyo Stock Exchange
Research output: Journal Publications and Reviews › RGC 62 - Review of books or of software (or similar publications/items) › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
Original language | English |
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Pages (from-to) | 1483-1508 |
Journal / Publication | Journal of Banking and Finance |
Volume | 29 |
Issue number | 6 |
Publication status | Published - Jun 2005 |
Link(s)
Abstract
Limit-order trading mechanisms, corporate ownership structure, and incentive structures in the Japanese brokerage industry differ from those in the US in several important ways. This paper exploits these differences to examine the joint and cross-sectional determinants of adverse selection costs, brokerage coverage, and trading activity for a large sample of Japanese firms traded on the Tokyo Stock Exchange. We find that adverse selection costs are associated with firm characteristics but not with ownership characteristics, which implies that adverse selection costs are affected by inside trading rather than inside holdings. We also find that while brokerage coverage reduces adverse selection costs, higher adverse selection costs lead more brokerage firms to enter the market because of the greater profit potential. Finally, we find that causality also runs both ways between brokerage coverage and trading volume: brokerage coverage increases trading volume and trading volume increases brokerage coverage. © 2004 Elsevier B.V. All rights reserved.
Research Area(s)
- Adverse selection cost, Brokerage coverage, Ownership structure, Trading activity
Citation Format(s)
Adverse selection, brokerage coverage, and trading activity on the Tokyo Stock Exchange. / Ahn, Hee-Joon; Cai, Jun; Hamao, Yasushi et al.
In: Journal of Banking and Finance, Vol. 29, No. 6, 06.2005, p. 1483-1508.
In: Journal of Banking and Finance, Vol. 29, No. 6, 06.2005, p. 1483-1508.
Research output: Journal Publications and Reviews › RGC 62 - Review of books or of software (or similar publications/items) › peer-review