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Speed of convergence to market efficiency for NYSE-listed foreign stocks

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  • Visaltanachoti, Nuttawat
  • Yang, Ting

Abstract

This paper contributes to the cross-listing literature by documenting the speed of convergence to market efficiency for foreign stocks listed on the NYSE. We find that, on average, it takes 30-60Â minutes for a foreign stock to achieve market efficiency. For a comparable US stock, it takes only 10-15Â minutes. The significant difference between foreign and US stocks remains robust when the speed is measured by the number of transactions rather than in calendar time. After relevant firm characteristics are controlled for, the time that it takes for foreign stocks to reach efficiency is significantly negatively related to the quality of their home country institutions. We find that one possible channel through which institutions affect the speed is through their impact on information asymmetry.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 34 (2010)
Issue (Month): 3 (March)
Pages: 594-605

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Handle: RePEc:eee:jbfina:v:34:y:2010:i:3:p:594-605

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

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Keywords: Cross-listing Speed of convergence to market efficiency Institutional quality Information asymmetry Illiquidity;

References

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Citations

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Cited by:
  1. Chung, Dennis Y. & Hrazdil, Karel, 2012. "Speed of convergence to market efficiency: The role of ECNs," Journal of Empirical Finance, Elsevier, vol. 19(5), pages 702-720.
  2. Tirapat, Sunti & Visaltanachoti, Nuttawat, 2013. "Opportunistic insider trading," Pacific-Basin Finance Journal, Elsevier, vol. 21(1), pages 1046-1061.
  3. Chung, Dennis Y. & Hrazdil, Karel, 2010. "Liquidity and market efficiency: Analysis of NASDAQ firms," Global Finance Journal, Elsevier, vol. 21(3), pages 262-274.
  4. Amira, Khaled & Muzere, Mark L., 2011. "Competition among stock exchanges for equity," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2355-2373, September.
  5. Su, Yong-Chern & Huang, Han-Ching & Hsu, Ming-Wei, 2010. "Convergence to market efficiency of top gainers," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2230-2237, September.
  6. Yamamoto, Ryuichi, 2012. "Intraday technical analysis of individual stocks on the Tokyo Stock Exchange," Journal of Banking & Finance, Elsevier, vol. 36(11), pages 3033-3047.
  7. Chung, Dennis & Hrazdil, Karel, 2010. "Liquidity and market efficiency: A large sample study," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2346-2357, October.
  8. Reboredo, Juan C. & Rivera-Castro, Miguel A. & Miranda, José G.V. & García-Rubio, Raquel, 2013. "How fast do stock prices adjust to market efficiency? Evidence from a detrended fluctuation analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(7), pages 1631-1637.

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