In defence of AIM
I’ve previously mentioned my support of the petition to end the prohibition on AIM stocks being held in ISAs. The most frequent argument I have had back is that AIM stocks are of poor quality. Clearly there are some poor quality AIM stocks. What of the average quality? This is from the abstract of a working paper Ulf Nielsson of the University of Copenhagen:
…This study, however, shows that these small firms listing on the relatively less regulated AIM market are of similar quality level as firms listing in the U.S. and in continental Europe. Consistent with this result, the failure rate among AIM listed firms is the same as that of other markets. Interestingly, they also raise relatively more capital and have a higher market valuation. Overall, even though high regulation standards may appease investors, the paper questions whether a strict regulation environment will necessarily facilitate stock market prosperity.
This paper does not compare AIM to the Main Market, and I would be interested to see a paper that does. However, I think Nielsson does demolish the crude “AIM stocks are stinkers” line.