ISE REVIEW

The Privatization of Stock Exchanges: The Case of Stockholm Stock Exchange
Bengt Ryden

Abstract
Stock exchanges will soon have to face a much more complex, demanding and competitive environment in the financial sector changing at a rapid pace. The main driving forces of this development will be the growing power of the fund managers of the large institutions managing the pension capital of the world, the continuing financial deregulation, and the widespread use of sophisticated technology. In such an environment, stock exchanges will initiate efforts towards privatization in order to strengthen their competitive powers and we will witness mergers of stock exchanges. As a pioneer in this respect, the Stockholm Stock Exchange provides a good example due to its high performance. The present article covers the development process of the Stockholm Stock Exchange and in particular, the privatization phase of it. The developments which led to the decision to privatize, the steps towards privatization and the results thereof are examined in this article in detail.

Stock Market Volatility and its Term Structure: Empirical Evidence
from the Turkish Market
Mustafa Kemal Yilmaz

Abstract
This paper focuses on the informational efficiency of an emerging stock market of a developing country, namely Turkey and also on stock market volatility from two different, but complementary perspective. In the first part, the volatility trend and its term structure throughout the time is analysed. In this context, the realised volatility and the expected volatility are calculated and compared under the random walk theory by using the relevant ISE Composite Index closing values ranging between 4 January 1988 and 27 December 1996. In the second part, the structure of the stock market volatility in Turkey has been investigated both for the 1988-1996 period as a whole and on a year basis so as to come up with some conclusion about one of the main parameters used in option pricing, namely volatility. Moreover, in this part, the volatility, starting from January 2, 1997 when two digits has been removed from the index, is analysed by using ISE-100 and ISE-30 Composite Index closing values realised between the period 2 January 1997 - 18 June 1997.

Abstract
This study empirically analyses the long-run performances of Turkish industrial IPOs and the factors influencing these performances. The sample consists of 88 firms listed and traded on the Istanbul Stock Exchange during the period of 1990 - 1995. The event study methodology is employed to analyse the long run performances in the 36 months following the initial trading day. The performance results indicate that the industrial group as whole experience a cumulative abnormal returns of 41.33% at the end of 36 months. At the same period, the abnormal returns of sub-groups ranges from -4.27% to 76.23%. The second part of study investigates the factors influencing the long-run performances of industrial IPOs. The factors influencing these returns include the post-listing return variation, self-issuance and privatization variables. Additionally, firms performing well on initial trading day have poor performances in the long run.

Abstract
One of the most contentious issues in the theory of finance during the past decades has been the capital structure “puzzle.” The genesis of this controversy was the seminal work of Modigliani and Miller (1958) which pointed the direction of research on this issue by showing under what conditions capital structure is irrelevant. The theoretical and empirical studies following Modigliani and Miller (1958), concentrated on the issue of capital structure from the view point of such issues as taxes, bankruptcy costs and financial distress, agency costs and information asymmetry, and emphasised the existence of an optimum capital structure. This paper aims to investigate the relationships between a firm’s capital structure and its size, business risk, profitability, non-debt tax shield, tax rate and growth rate. The cross sectional data of 68 Istanbul Stock Exchange firms were analysed over the 1990 through 1995 period by the ordinary least squares method (OLS). Evidence obtained by this research confirmed strong relations between capital structure and profitability and non-debt tax shield. The decline in long-term debt opportunities for the Turkish firms due to the instability caused by inflation was also reflected in the results.

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