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Trading imbalances and the law of one price

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  • Seasholes, Mark S.
  • Liu, Clark
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    Abstract

    We study trading and prices of Chinese (mainland)/Hong Kong dual-listed shares. Relative prices can diverge by a factor of two and exhibit significant variation over time. Order imbalances explain contemporaneous changes in relative prices at daily and weekly frequencies.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 112 (2011)
    Issue (Month): 1 (July)
    Pages: 132-134

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    Handle: RePEc:eee:ecolet:v:112:y:2011:i:1:p:132-134

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    Web page: http://www.elsevier.com/locate/ecolet

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    Keywords: Law of one price Cross-listings Order imbalances;

    References

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    1. Kenneth A. Froot & Emil Dabora, 1998. "How are Stock Prices Affected by the Location of Trade?," NBER Working Papers 6572, National Bureau of Economic Research, Inc.
    2. Grossman, Sanford J & Miller, Merton H, 1988. " Liquidity and Market Structure," Journal of Finance, American Finance Association, vol. 43(3), pages 617-37, July.
    3. Jianping Mei & Jose Scheinkman & Wei Xiong, 2005. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," NBER Working Papers 11362, National Bureau of Economic Research, Inc.
    4. Abe De Jong & Leonard Rosenthal & Mathijs A. Van Dijk, 2009. "The Risk and Return of Arbitrage in Dual-Listed Companies," Review of Finance, European Finance Association, vol. 13(3), pages 495-520.
    5. Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," NBER Working Papers 13189, National Bureau of Economic Research, Inc.
    6. Kenneth A. Froot & Tarun Ramadorai, 2008. "Institutional Portfolio Flows and International Investments," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 937-971, April.
    7. Mark S. Seasholes & Terrence Hendershott, 2007. "Market Maker Inventories and Stock Prices," American Economic Review, American Economic Association, vol. 97(2), pages 210-214, May.
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    Cited by:
    1. Marc K Chan, 2014. "How Well Do Prices Converge in Anticipation of Capital Control Liberalization? Evidence from a Chinese Reform," Working Paper Series 22, Economics Discipline Group, UTS Business School, University of Technology, Sydney.

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