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Title: Anomalies on the London Stock Exchange: The influence of the bid-ask spread and nonsynchronous trading
Authors: Batty, Richard Andrew
Advisors: Garrett, I
Keywords: Seasonal anornalies;Daily predictability;Mispricing;Portfolio returns;Time-series regression framework
Issue Date: 1994
Publisher: School of Social Sciences Theses
Abstract: This thesis tests for seasonal anornalies and daily predictability on the UK stock market and investigates how mispricing caused by the bid-ask spread, known as the 'touch' and nonsynchronous trading in portfolio returns may explain these anomalies. By using constructed portfolios within a th-ne-series regression framework, I show that seasonality, in the first instance, is prominent in returns around the turn of the week and the turn of the year. However, this seasonal returns behaviour disappears when the touch is accounted for. Indeed, seasonality seerns to occur in the touch rather than returns. Despite this touch explanation, lagged returns remain significant, suggesting return predictability. In fact, when using a price adjustment model returns are predictable across portfolios. This predictability, while to some extent dependent upon firm size and the touch, may be accounted for by nonsynchronous trading. First-order autocorrelation and cross-autocorrelation found in returns proves more indicative of infrequent trading than return predictability. Thus, these results confirm that mismeasurernent in portfolio returns caused by market microstructure and nonsynchronous trading can create false inferences about the extent of stock market anornalies in the UK and subsequently, market efficiency.
Description: This thesis was submitted for the degree of Doctor of Philosophy and awarded by Brunel University.
Appears in Collections:Economics and Finance
Dept of Economics and Finance Theses

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