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Intervalling-effect bias and evidences for competition policy

Author

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  • Fotis, Panagiotis
  • Pekka, Victoria
  • Polemis, Michael

Abstract

The purpose of this paper is on the one hand to analyze whether the security’s systematic risk beta estimates change as the infrequent trading phenomenon appears and on the other hand to provide useful insight on the impact of mergers and acquisitions on competition policy. The paper employs the models of Scholes and Williams (1977), Dimson (1979), Cohen et al. (1983a) and Maynes and Rumsey (1993) on a small stock exchange with thickly infrequent trading stocks. The empirical results reveal that for some securities the models employed by Scholes and Williams (1977) and Cohen et al. (1983a) improve the biasness of the Ordinary Least Squares Market Model (Maynes and Rumsey, 1993). Regarding competition policy issues, we argue that competitors gain while merged entities loose or at least do not gain from the clearness of the mergers under scrutiny. However, if we focus our attention on each individual merger, the results are rather controversial.

Suggested Citation

  • Fotis, Panagiotis & Pekka, Victoria & Polemis, Michael, 2015. "Intervalling-effect bias and evidences for competition policy," MPRA Paper 63211, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63211
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    File URL: https://mpra.ub.uni-muenchen.de/63211/1/MPRA_paper_63211.pdf
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    References listed on IDEAS

    as
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    2. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
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    5. Seth Armitage & Janusz Brzeszczynski, 2011. "Heteroscedasticity and interval effects in estimating beta: UK evidenceÂ," CFI Discussion Papers 1103, Centre for Finance and Investment, Heriot Watt University.
    6. Panagiotis N. Fotis, 2014. "Economic Tools for Merger Appraisal: A Theoretical and Empirical Standpoint," Journal of Reviews on Global Economics, Lifescience Global, vol. 3, pages 24-32.
    7. Fei Jiang & Lawrence A. Leger, 2010. "The impact on performance of IPO allocation reform," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 2(3), pages 251-272, August.
    8. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin, 2010. "Is the event study methodology useful for merger analysis? A comparison of stock market and accounting data," International Review of Law and Economics, Elsevier, vol. 30(2), pages 186-192, June.
    9. Kalman J. Cohen & Gabriel A. Hawawini & Steven F. Maier & Robert A. Schwartz & David K. Whitcomb, 1983. "Estimating and Adjusting for the Intervalling-Effect Bias in Beta," Management Science, INFORMS, vol. 29(1), pages 135-148, January.
    10. Seth Armitage & Janusz Brzeszczynski, 2011. "Heteroscedasticity and interval effects in estimating beta: UK evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 21(20), pages 1525-1538.
    11. Maynes, Elizabeth & Rumsey, John, 1993. "Conducting event studies with thinly traded stocks," Journal of Banking & Finance, Elsevier, vol. 17(1), pages 145-157, February.
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    15. Panagiotis Fotis & Michael Polemis & Nikolaos Zevgolis, 2011. "Robust Event Studies for Derogation from Suspension of Concentrations in Greece during the Period 1995–2008," Journal of Industry, Competition and Trade, Springer, vol. 11(1), pages 67-89, March.
    16. Tomaso Duso & Damien J. Neven & Lars-Hendrik Röller, 2007. "The Political Economy of European Merger Control: Evidence using Stock Market Data," Journal of Law and Economics, University of Chicago Press, vol. 50(3), pages 455-489.
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    More about this item

    Keywords

    Intervalling-effect bias; Beta risk measurement; infrequent trading phenomenon; mergers and acquisiti¬ons; com¬pe¬¬¬tition po¬licy;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • K0 - Law and Economics - - General

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