Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5084582 | International Review of Financial Analysis | 2016 | 11 Pages |
Abstract
I examine the relative informational efficiency of the London Stock Exchange's newly launched Order book for Retail Bonds (ORB). I find that the daily returns for the stocks of the issuing firms lead the daily returns of the retail bonds born in the ORB. This finding also holds for pre-existing bonds that were transferred to the ORB from the LSE's Main Market and for the bonds with different credit ratings, issue sizes, and maturity times. I also find that bonds have very limited predictive ability for stock returns. Overall, the results provide strong evidence that the underlying stock market is relatively more efficient than the ORB. Further, the relative informational inefficiency of the ORB implies profitable trading opportunities for private investors.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Konstantinos Tolikas,