Modelling Round-the-Clock Price Discovery for Cross-Listed Stocks Using State Space Methods PDF Download
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Author: Albert J. Menkveld
Publisher:
ISBN:
Category :
Languages : en
Pages : 30
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Book Description
U.S. trading in non-U.S. stocks has grown dramatically. Round-the-clock, these stocks trade in the home market, in the U.S. market and, potentially, in both markets simultaneously. We develop a general methodology based on a state space model to study 24-hour price discovery in a multiple markets setting. As opposed to the standard variance ratio approach, this model deals naturally with (i) simultaneous quotes in an overlap, (ii) missing observations in a non-overlap, (iii) noise due to transitory microstructure effects, and (iv) contemporaneous correlation in returns due to market-wide factors. We provide an application of our model to Dutch-U.S. stocks. Our findings suggest a minor role for the NYSE in price discovery for Dutch shares, in spite of its non-trivial and growing market share. The results differ significantly from the variance ratio approach.
Author: Albert J. Menkveld
Publisher:
ISBN:
Category :
Languages : en
Pages : 30
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Book Description
U.S. trading in non-U.S. stocks has grown dramatically. Round-the-clock, these stocks trade in the home market, in the U.S. market and, potentially, in both markets simultaneously. We develop a general methodology based on a state space model to study 24-hour price discovery in a multiple markets setting. As opposed to the standard variance ratio approach, this model deals naturally with (i) simultaneous quotes in an overlap, (ii) missing observations in a non-overlap, (iii) noise due to transitory microstructure effects, and (iv) contemporaneous correlation in returns due to market-wide factors. We provide an application of our model to Dutch-U.S. stocks. Our findings suggest a minor role for the NYSE in price discovery for Dutch shares, in spite of its non-trivial and growing market share. The results differ significantly from the variance ratio approach.
Author: Albert J. Menkveld
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
U.S. trading in non-U.S. stocks has grown dramatically. Round-the-clock, these stocks trade in the home market, in the U.S. market and, potentially, in both markets simultaneously. We develop a general methodology based on a state space model to study 24-hour price discovery in a multiple markets setting. As opposed to the standard variance ratio approach, this model deals naturally with (i) simultaneous quotes in an overlap, (ii) missing observations in a non-overlap, (iii) noise due to transitory microstructure effects, and (iv) contemporaneous correlation in returns due to market-wide factors. We apply our model to Dutch stocks, cross-listed in the U.S. Our findings suggest a minor role for the NYSE in price discovery for Dutch shares, in spite of its non-trivial and growing market share.
Author: Albert Jan Menkveld
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
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Book Description
Author: A. J. Menkveld
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Author: Allan W. Kleidon
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 62
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Book Description
This paper uses transactions data from the London Stock Exchange to characterize the intraday pattern of security prices and trading volume for securities trading on SEAQ. It focuses in more detail on a sample of U.K. firms that are cross-listed on the NYSE. Using additional data from the NYSE-AMEX (I5SM), we compare volatility, volume, and quotes as trading starts in London and then continues in New York. These firms have substantially longer trading hours than most singly-listed stocks, and are also traded in two markets with very different institutional setups. This is shown to have several important implications for theories on intraday behavior of prices, the organization of exchanges, and the general consequences of round-the-clock trading.
Author: Joachim Grammig
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
Abstract: This paper addresses two issues: 1) where does price discovery occur for firms that are traded simultaneously in the U.S. and in their home markets and 2) what explains the differences across firms in the share of price discovery that occurs in the U.S? The answer to the first question is that the home market is typically where the majority of price discovery occurs, but there are significant exceptions to this rule and the nature of price discovery across international markets during the time of trading overlap is richer and more complex that previously realized. For the second question, the results provide strong support that liquidity is an important factor. For a particular firm, the greater the liquidity of U.S. trading relative to the home market, the greater the role for U.S. price discovery.
Author: Roberto Pascual
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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Book Description
This paper analyzes the price discovery process of securities that trade at multiple markets with trading sessions that totally or partially overlap. Building on Hasbrouck (1995) information share approach, we introduce a methodology that distinguishes two sources of information asymmetries between markets: traderelated and trade-unrelated informative shocks. This approach determines how much of each market's relative contribution to the price discovery process during the overlapping period is attributable to its own trading activity. We provide empirical evidence on the contribution of the NYSE in the price discovery process of the Spanish cross-listed stocks during the daily two-hour overlapping interval.
Author: Larry J. Lockwood
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
Studies of cross-listings show home markets dominate price discovery and point to informational advantages of local investors. However, we show price discovery gravitates to markets with better order execution quality and find home markets do not dominate price discovery. Instead, price discovery is more evenly split, especially for emerging markets. The dominant market is determined by order execution as price discovery shifts 22% when order execution advantages reverse between home and foreign markets. Thus, markets with poor execution quality act more as satellite markets, adjusting to more liquid markets, and play a diminished informational role in the pricing of cross-listed stocks.
Author: Vassilios G. Papavassiliou
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ISBN:
Category :
Languages : en
Pages :
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Book Description
Using a novel high-frequency data set, we examine the contribution of Greek trading to the price discovery process of a pair of Cypriot blue-chip, cross-listed stocks during overlapping trading hours. Additionally, we investigate the effects of market fragmentation on the home market's quality, as measured by microstructure-based liquidity measures. Contrary to earlier studies from other markets, our findings show that foreign stock exchanges can act as the leading contributors to price discovery and can concentrate the majority of trading activity and produce the lowest transaction costs. Our results also show that market fragmentation can lead to negative effects on market liquidity.
Author: Sanjiv Sabherwal
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ISBN:
Category :
Languages : en
Pages :
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Book Description
We investigate price discovery for internationally traded stocks. For a sample of Canadian stocks cross-listed on the Toronto Stock Exchange (TSE) and the NYSE, we find that both markets contribute to price discovery. The U.S. share of price discovery ranges from 0.4 percent to 98.1 percent, and averages 36 percent. The U.S. contribution is directly related to the U.S. share of trading and to the ratio of proportions of informative trades on the NYSE and the TSE, and inversely related to the ratio of bid-ask spreads on the NYSE and the TSE. In response to a positive shock to the C$/US$ exchange rate, stock prices on the TSE rise, whereas those on the NYSE decline. The NYSE bears a much greater burden of adjusting to the exchange rate changes.
