Author： Chelley-Steeley Patricia Li Yan
Publisher： Routledge Ltd
ISSN： 1744-6546
Source： Applied Financial Economics Letters, Vol.1, Iss.6, 2005-11, pp. : 373-380
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Abstract
An expanding literature exists to suggest that the trading mechanism can influence the volatility of security returns. This study adds to this literature by examining the impact that the introduction of SETS, on the London Stock Exchange, had on the volatility of security returns. Using a Markov switching regime change model security volatility is categorized as being in a regime of either high or low volatility. It is shown that prior to the introduction of SETS securities tended to be in a low volatility regime. At the time SETS was introduced securities moved to a high volatility regime. This suggests that volatility increased when SETS was introduced.
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