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Who Wins When Exchanges Compete?* Evidence from Competition after Euro Conversion
[Equity returns and integration: is Europe changing?]

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  • Kathryn L Dewenter
  • Xi Han
  • Jennifer L Koski

Abstract

Using euro conversion as the trigger, we examine what drives volume and spread changes when stock exchanges compete. Results show average trading costs on European exchanges decrease almost 9%, and turnover increases over 30%. Trading costs decline or remain unchanged on all exchanges, but volume deteriorates in some markets and improves in others. Frankfurt, Paris, London, and Milan are winners, while Madrid and Brussels lose volume. We examine the role of the spread-volume relation, firm characteristics, exchange trading rules, and country-level factors in determining these outcomes. Results suggest that euro conversion prompted competition by increasing transparency in market prices.

Suggested Citation

  • Kathryn L Dewenter & Xi Han & Jennifer L Koski, 2018. "Who Wins When Exchanges Compete?* Evidence from Competition after Euro Conversion [Equity returns and integration: is Europe changing?]," Review of Finance, European Finance Association, vol. 22(6), pages 2037-2071.
    • Handle: RePEc:oup:revfin:v:22:y:2018:i:6:p:2037-2071.
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    More about this item

    Keywords

    Exchange competition; Euro adoption; Transparency; Trading costs; Volume;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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