Price Discovery for Cross-Listed Securities from Emerging Eastern European Countries
AbstractThis study provides empirical evidence verifying the theory of price discovery for Eastern European enterprises based on their cross-listing on Western European exchanges. Despite the fact that the crosslisting behavior of companies has been analyzed very actively since the mid-70s, many competing hypotheses exist, and the debate is far from reaching an end. Cumulative average residuals (CARs) document increased information efficiency after the listing in Frankfurt or London. This result is supported by a stylized microstructure model. To be precise, competition for order flow alleviates informational frictions and reduces dealers? market power. These properties, however, are unevenly distributed among the auction system Frankfurt and the market maker system London. GARCH volatility spillovers strongly support these results and quantify a dominant role for home markets in information discovery. Moreover, they provide information on the relative functions of Frankfurt and London. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 07-067.
Date of creation: 2007
Date of revision:
Cross-Listing; Cumulative Average Residuals; Eastern Europe; Information Discovery; Time Series;
Find related papers by JEL classification:
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-02 (All new papers)
- NEP-MST-2008-02-02 (Market Microstructure)
- NEP-TRA-2008-02-02 (Transition Economics)
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