An Autopsy of a Total Stock Market Failure

Ioannis V. Floros, David Florysiak, Shane M. Johnson

Publikation: Konferencebidrag uden forlag/tidsskriftPaperForskning

Resumé

We study a unique case in which a stock market experienced an Akerlof-type failure. We find that a relatively small fraction of ‘bad’ firms combined with high levels of asymmetric information led to a series of Akerlof-type spillovers onto good firms evident in increased trading costs and reduced liquidity and volume. As good firms suffered adverse pricing effects, they exited the market, leading to increases in the fraction of bad firms and further deterioration in the market. Regulators intervened attempting to rescue the market, but the problems accelerated; regulators ultimately shut down the market. Our work sheds light on how stock markets with low transparency and low listing requirements can fail with even just a small fraction of bad firms.
OriginalsprogEngelsk
Publikationsdato2018
StatusUdgivet - 2018
BegivenhedFMA European Conference - Kristiansand, Norge
Varighed: 13. jun. 201815. jun. 2018

Konference

KonferenceFMA European Conference
LandNorge
ByKristiansand
Periode13/06/201815/06/2018

Fingeraftryk

Stock market
Market failure
Asymmetric information
Liquidity
Spillover
Pricing
Deterioration
Trading costs
Transparency

Citer dette

Floros, I. V., Florysiak, D., & Johnson, S. M. (2018). An Autopsy of a Total Stock Market Failure. Afhandling præsenteret på FMA European Conference, Kristiansand, Norge.
Floros, Ioannis V. ; Florysiak, David ; Johnson, Shane M. / An Autopsy of a Total Stock Market Failure. Afhandling præsenteret på FMA European Conference, Kristiansand, Norge.
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Floros, IV, Florysiak, D & Johnson, SM 2018, 'An Autopsy of a Total Stock Market Failure' Paper fremlagt ved FMA European Conference, Kristiansand, Norge, 13/06/2018 - 15/06/2018, .

An Autopsy of a Total Stock Market Failure. / Floros, Ioannis V.; Florysiak, David; Johnson, Shane M.

2018. Afhandling præsenteret på FMA European Conference, Kristiansand, Norge.

Publikation: Konferencebidrag uden forlag/tidsskriftPaperForskning

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T1 - An Autopsy of a Total Stock Market Failure

AU - Floros, Ioannis V.

AU - Florysiak, David

AU - Johnson, Shane M.

PY - 2018

Y1 - 2018

N2 - We study a unique case in which a stock market experienced an Akerlof-type failure. We find that a relatively small fraction of ‘bad’ firms combined with high levels of asymmetric information led to a series of Akerlof-type spillovers onto good firms evident in increased trading costs and reduced liquidity and volume. As good firms suffered adverse pricing effects, they exited the market, leading to increases in the fraction of bad firms and further deterioration in the market. Regulators intervened attempting to rescue the market, but the problems accelerated; regulators ultimately shut down the market. Our work sheds light on how stock markets with low transparency and low listing requirements can fail with even just a small fraction of bad firms.

AB - We study a unique case in which a stock market experienced an Akerlof-type failure. We find that a relatively small fraction of ‘bad’ firms combined with high levels of asymmetric information led to a series of Akerlof-type spillovers onto good firms evident in increased trading costs and reduced liquidity and volume. As good firms suffered adverse pricing effects, they exited the market, leading to increases in the fraction of bad firms and further deterioration in the market. Regulators intervened attempting to rescue the market, but the problems accelerated; regulators ultimately shut down the market. Our work sheds light on how stock markets with low transparency and low listing requirements can fail with even just a small fraction of bad firms.

M3 - Paper

ER -

Floros IV, Florysiak D, Johnson SM. An Autopsy of a Total Stock Market Failure. 2018. Afhandling præsenteret på FMA European Conference, Kristiansand, Norge.