The determinants of brokerage fees in a competitive environment

Article Abstract:

A Trade Practices Commission ruling, which came into effect on 1 April 1984, prohibited the Australian Associated Stock Exchanges (now known as the Australian Stock Exchange) from fixing brokerage fees. The expected consequence was a move to competitive pricing. Specifically, it was expected that brokerage fees would more accurately reflect the costs of providing brokerage services. This study analyses the evolution of the pricing mechanism since deregulation. In particular, it tests the influence of factors such as order size, broker quality, broker size, inventory costs, search costs, broker specialisation and broker learning on brokerage fees. (Reprinted by permission of the publisher.)

Security and commodity exchanges, Security brokers and dealers, Admin. of general economic programs, Laws, regulations and rules, Deregulation, Australian Stock Exchange Ltd., Australia. Trade Practices Commission

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Partial takeovers as put options

Article Abstract:

For stocks of a listed company subject to a takeover offer, a premium must be paid by the bidder to induce acceptance of the offer. For partial takeovers, this premium can be modelled as a put option. While the takeover is current, temporary support for the stock may materialize, possibly resulting in increased prices. The price of options or warrants over the target stock can be used as a means of estimating the ex-takeover stock price, the takeover premium, and any extra support the temporarily may be in the observed market price. This leads to an evaluation of the probable success of the takeover. (Reprinted by permission of the publisher.)

Research, Acquisitions and mergers, Options (Finance), Stock options

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The non-stationarity of share price volatility

Article Abstract:

This article examines first the changes over time in the variance of the market return on the Sydney Stock Exchange. It concludes that variance changes at a frequency greater than previously accounted for. Some of these changes coincide with political and economic events. Next the market returns are demonstrated to have a normal distribution. This result follows once the frequency of standardization is matched to the frequency of changes in variance. (Reprinted by permission of the publisher.)

Prices and rates, Securities prices, Sydney Stock Exchange

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