As Economic and Monetary Union draws ever closer it is already beginning to have an impact on trading patterns in European stock markets. Banks and financial institutions have begun to keep their trading activity to the bare minimum. This is to free up their administrative staff to cope with the extra burden associated with the changeover to the euro. Also institutions want to avoid situations where a transaction originates in the local currency, such as Irish pounds, but settles in the euro.

Therefore, the traditional seasonal lull in trading activity is likely to be more pronounced than normal this year. From January 1st Irish shares will be quoted in euros and with the IR£/euro rate at around 0.8 this will mean that the euro price of shares will be higher than the equivalent IR£price. Table 1 lists some of the leading Irish quoted shares showing their likely euro prices.

Many private investors like to buy shares with low nominal prices. Presumably this is because they feel that there is more upside in a share with a price of 50p than there is with one priced at £10. In practice there is little evidence to support this assumption. A glance at the year-to-date performance of Irish shares suggests the opposite - highly-priced shares have in fact being doing better in recent times.

Table 2 lists the top 12 performing Irish stocks in the year-to-date (end-November). The list includes such highly priced shares as AIB, Iona Technologies, Hibernian, Bank of Ireland and Elan Corporation.

Of course the top performers also include several low-priced shares such as McInerney Properties and Seafield.

However, the list of the markets worst performing shares consists almost entirely of shares priced at under £1. This list includes Powerscreen (-80.4 per cent), Tullow Oil (60.7 per cent), Hampden Group (-52.2 per cent), Ivernia West (-44.7 per cent). Waterford Wedgwood and Smurfit are the only large capitalisation stocks which have experienced large falls in their share prices this year declining by 34.7 per cent and 32.3 per cent respectively. It is noteworthy that the share prices of these two companies are low compared with the "heavier" prices of Bank of Ireland and CRH.

To some extent these performance tables reflect the fact that large companies have been doing better than their smaller brethren in recent years. This is not just an Irish phenomenon but has been the experience across the majority of stock markets. Of course some smaller companies have done exceptionally well. Indeed there is generally much more upside in a small company which succeeds than there is from a large company. Particularly, for private investors it is the allure of spectacular gains that draws them to smaller companies with low share prices.

Unfortunately, the problem is that for every high-flying success story there are a large number of failures. Therefore, concentrating on the lower priced stocks is in fact a much riskier strategy than taking a more balanced approach by investing in large capitalisation stocks with just a smattering of smaller special situations.