Stock exchange consolidation and volatility: the case of Euronext

Since the nineties, stock markets have been experiencing significant technological, legal and other kind of changes affecting their organization and structure. This has led to strategic moves in mergers and alliances at a national as well as at an international scale. The aim of this paper is to better understand this phenomenon and analyze its impact on the future of stock markets considered as any operational firm seeking to maximize its profits. To achieve this, we focus on the case of the merger of three out of four stock exchanges now forming Euronext. Our goal being to study that merger and its potential effect on Euronext’s market risk (measured by volatility). However, the results obtained are mixed. In terms of volatility, the merger is beneficial only for one of the three markets studied. This leads to the insight that the expected benefits in merging depend on the features of each market, its importance and its degree of integration with other financial places before its effective consolidation. JEL classification: F36, G15, G32, G34