IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/4410.html
   My bibliography  Save this paper

Round-the-clock Trading: Evidence from U.K. Cross-Listed Securities

Author

Listed:
  • Allan W. Kleidon
  • Ingrid M. Werner

Abstract

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.

Suggested Citation

  • Allan W. Kleidon & Ingrid M. Werner, 1993. "Round-the-clock Trading: Evidence from U.K. Cross-Listed Securities," NBER Working Papers 4410, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4410
    Note: IFM
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w4410.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wood, Robert A & McInish, Thomas H & Ord, J Keith, 1985. "An Investigation of Transactions Data for NYSE Stocks," Journal of Finance, American Finance Association, vol. 40(3), pages 723-739, July.
    2. Foster, F Douglas & Viswanathan, S, 1990. "A Theory of the Interday Variations in Volume, Variance, and Trading Costs in Securities Markets," The Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 593-624.
    3. Amihud, Yakov & Mendelson, Haim & Murgia, Maurizio, 1990. "Stock market microstructure and return volatility : Evidence from Italy," Journal of Banking & Finance, Elsevier, vol. 14(2-3), pages 423-440, August.
    4. Hamao, Yasushi & Hasbrouck, Joel, 1995. "Securities Trading in the Absence of Dealers: Trades and Quotes on the Tokyo Stock Exchange," The Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 849-878.
    5. Pagano, Marco & Röell, Ailsa A, 1991. "Dually-Traded Italian Equities: London vs. Milan," CEPR Discussion Papers 564, C.E.P.R. Discussion Papers.
    6. Subrahmanyam, Avanidhar, 1991. "Risk Aversion, Market Liquidity, and Price Efficiency," The Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 416-441.
    7. Alexander, Gordon J. & Eun, Cheol S. & Janakiramanan, S., 1988. "International Listings and Stock Returns: Some Empirical Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(2), pages 135-151, June.
    8. George, Thomas J & Kaul, Gautam & Nimalendran, M, 1991. "Estimation of the Bid-Ask Spread and Its Components: A New Approach," The Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 623-656.
    9. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
    10. Amihud, Yakov & Mendelson, Haim, 1987. "Trading Mechanisms and Stock Returns: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 42(3), pages 533-553, July.
    11. Stoll, Hans R & Whaley, Robert E, 1990. "Stock Market Structure and Volatility," The Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 37-71.
    12. Biais, Bruno & Hillion, Pierre & Spatt, Chester, 1995. "An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse," Journal of Finance, American Finance Association, vol. 50(5), pages 1655-1689, December.
    13. Brock, William A. & Kleidon, Allan W., 1992. "Periodic market closure and trading volume : A model of intraday bids and asks," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 451-489.
    14. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," The Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
    15. Chan, K C & Christie, William G & Schultz, Paul H, 1995. "Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities," The Journal of Business, University of Chicago Press, vol. 68(1), pages 35-60, January.
    16. Barclay, Michael J & Litzenberger, Robert H & Warner, Jerold B, 1990. "Private Information, Trading Volume, and Stock-Return Variances," The Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 233-253.
    17. Amihud, Yakov & Mendelson, Haim, 1989. "Market microstructure and price discovery on the Tokyo Stock Exchange," Japan and the World Economy, Elsevier, vol. 1(4), pages 341-370, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Foucault, Thierry, 1999. "Order flow composition and trading costs in a dynamic limit order market1," Journal of Financial Markets, Elsevier, vol. 2(2), pages 99-134, May.
    2. Eric Levin & Robert Wright, 1999. "Why does the bid-ask spread vary over the day?," Applied Economics Letters, Taylor & Francis Journals, vol. 6(9), pages 563-567.
    3. ap Gwilym, Owain & Thomas, Stephen, 2002. "An empirical comparison of quoted and implied bid-ask spreads on futures contracts," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(1), pages 81-99, February.
    4. Sjoo, Boo & Zhang, Jianhua, 2000. "Market segmentation and information diffusion in China's stock markets," Journal of Multinational Financial Management, Elsevier, vol. 10(3-4), pages 421-438, December.
    5. Wen-Ling Lin & Takatoshi Ito, 1994. "Price Volatility and Volume Spillovers between the Tokyo and New York Stock Markets," NBER Chapters, in: The Internationalization of Equity Markets, pages 309-343, National Bureau of Economic Research, Inc.
    6. Levin, Eric J. & Wright, Robert E., 1999. "Explaining the intra-day variation in the bid-ask spread in competitive dealership markets - A research note 1," Journal of Financial Markets, Elsevier, vol. 2(2), pages 179-191, May.
    7. Chan, K. C. & Fong, Wai-Ming & Kho, Bong-Chan & Stulz, ReneM., 1996. "Information, trading and stock returns: Lessons from dually-listed securities," Journal of Banking & Finance, Elsevier, vol. 20(7), pages 1161-1187, August.
    8. Peter C. Reiss & Ingrid M. Werner, 1994. "Transaction Costs in Dealer Markets: Evidence From The London Stock Exchange," NBER Working Papers 4727, National Bureau of Economic Research, Inc.
    9. Brockman, Paul & Chung, Dennis Y., 1998. "Inter- and intra-day liquidity patterns on the Stock Exchange of Hong Kong," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 277-298, December.
    10. A. Abhyankar & L. S. Copeland & W. Wong, 1999. "LIFFE cycles: intraday evidence from the FTSE-100 Stock Index futures market," The European Journal of Finance, Taylor & Francis Journals, vol. 5(2), pages 123-139.
    11. Forster, Margaret M. & George, Thomas J., 1995. "Trading hours, information flow, and international cross-listing," International Review of Financial Analysis, Elsevier, vol. 4(1), pages 19-34.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Biais, Bruno & Glosten, Larry & Spatt, Chester, 2005. "Market microstructure: A survey of microfoundations, empirical results, and policy implications," Journal of Financial Markets, Elsevier, vol. 8(2), pages 217-264, May.
    2. Chow, Edward H. & Lee, Jie-Haun & Shyy, Gang, 1996. "Trading mechanisms and trading preferences on a 24-hour futures market: A case study of the Floor/GLOBEX switch on MATIF," Journal of Banking & Finance, Elsevier, vol. 20(10), pages 1695-1713, December.
    3. Harrison Hong & Jiang Wang, 2000. "Trading and Returns under Periodic Market Closures," Journal of Finance, American Finance Association, vol. 55(1), pages 297-354, February.
    4. Goodhart, Charles A. E. & O'Hara, Maureen, 1997. "High frequency data in financial markets: Issues and applications," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 73-114, June.
    5. Obizhaeva, Anna A. & Wang, Jiang, 2013. "Optimal trading strategy and supply/demand dynamics," Journal of Financial Markets, Elsevier, vol. 16(1), pages 1-32.
    6. Brockman, Paul & Chung, Dennis Y., 1998. "Inter- and intra-day liquidity patterns on the Stock Exchange of Hong Kong," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 277-298, December.
    7. Gary Tian & Mingyuan Guo, 2007. "Interday and intraday volatility: Additional evidence from the Shanghai Stock Exchange," Review of Quantitative Finance and Accounting, Springer, vol. 28(3), pages 287-306, April.
    8. Kaplanski, Guy & Levy, Haim, 2015. "Trading breaks and asymmetric information: The option markets," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 390-404.
    9. Koopman, S.J.M. & Lai, H.N., 1998. "Modelling bid-ask spreads in competitive dealership markets," Other publications TiSEM 7a193911-dbf2-4831-ac8d-9, Tilburg University, School of Economics and Management.
    10. Jones, Charles M. & Kaul, Gautam & Lipson, Marc L., 1994. "Information, trading, and volatility," Journal of Financial Economics, Elsevier, vol. 36(1), pages 127-154, August.
    11. Bildik, Recep, 2001. "Intra-day seasonalities on stock returns: evidence from the Turkish Stock Market," Emerging Markets Review, Elsevier, vol. 2(4), pages 387-417, December.
    12. Escribano, Álvaro & Tapia, Mikel & Pascual, Roberto, 1999. "How does liquidity behave? A multidimensional analysis of NYSE stocks," DEE - Working Papers. Business Economics. WB 6433, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    13. Kehr, Carl-Heinrich & Krahnen, Jan P. & Theissen, Erik, 2001. "The Anatomy of a Call Market," Journal of Financial Intermediation, Elsevier, vol. 10(3-4), pages 249-270, July.
    14. Chen, Tao & Li, Jie & Cai, Jun, 2008. "Information content of inter-trade time on the Chinese market," Emerging Markets Review, Elsevier, vol. 9(3), pages 174-193, September.
    15. Chan, Kalok & Chockalingam, Mark & Lai, Kent W. L., 2000. "Overnight information and intraday trading behavior: evidence from NYSE cross-listed stocks and their local market information," Journal of Multinational Financial Management, Elsevier, vol. 10(3-4), pages 495-509, December.
    16. Chelley-Steeley, Patricia & Park, Keebong, 2011. "Intraday patterns in London listed Exchange Traded Funds," International Review of Financial Analysis, Elsevier, vol. 20(5), pages 244-251.
    17. Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
    18. Andersen, Torben G. & Bollerslev, Tim & Cai, Jun, 2000. "Intraday and interday volatility in the Japanese stock market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(2), pages 107-130, June.
    19. Rhee, S. Ghon & Wang, Chi-Jeng, 1997. "The bid-ask bounce effect and the spread size effect: Evidence from the Taiwan stock market," Pacific-Basin Finance Journal, Elsevier, vol. 5(2), pages 231-258, June.
    20. Agarwalla, Sobhesh Kumar & Pandey, Ajay, 2012. "Whether Cross-Listing, Stock-specific and Market-wide Calendar Events impact Intraday Volatility Dynamics? Evidence from the Indian Stock Market using High-frequency Data," IIMA Working Papers WP2012-11-03, Indian Institute of Management Ahmedabad, Research and Publication Department.

    More about this item

    JEL classification:

    • F - International Economics
    • G - Financial Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4410. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.