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. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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
- 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
- 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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Steven N. Kaplan & Luigi Zingales, 2000.
"Investment-Cash Flow Sensitivities are not Valid Measures of Financing Constraints,"
NBER Working Papers
7659, National Bureau of Economic Research, Inc.
- Steven N. Kaplan & Luigi Zingales, 2000. "Investment-Cash Flow Sensitivities Are Not Valid Measures Of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 707-712, May.
- Fernandes, Nuno & Ferreira, Miguel A., 2008. "Does international cross-listing improve the information environment," Journal of Financial Economics, Elsevier, vol. 88(2), pages 216-244, May.
- Errunza, Vihang & Losq, Etienne, 1985. " International Asset Pricing under Mild Segmentation: Theory and Test," Journal of Finance, American Finance Association, vol. 40(1), pages 105-24, March.
- Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
- Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-84, June.
- Lawrence R. Glosten & Paul R. Milgrom, 1983.
"Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders,"
570, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Angela Black & David McMillan, 2004. "Long run trends and volatility spillovers in daily exchange rates," Applied Financial Economics, Taylor and Francis Journals, vol. 14(12), pages 895-907.
- Kim, S.W. & Rogers, J.H., 1993.
"International Stock Price Spillovers and Market Liberalization: Evidence from Korea, Japan, and the United States,"
4-93-7, Pennsylvania State - Department of Economics.
- Kim, Sang W. & Rogers, John H., 1995. "International stock price spillovers and market liberalization: Evidence from Korea, Japan, and the United States," Journal of Empirical Finance, Elsevier, vol. 2(2), pages 117-133, June.
- Sang W. Kim & John H. Rogers, 1995. "International stock price spillovers and market liberalization: evidence from Korea, Japan, and the United States," International Finance Discussion Papers 499, Board of Governors of the Federal Reserve System (U.S.).
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
- Raghuram G. Rajan & Luigi Zingales, .
"Financial Dependence and Growth,"
CRSP working papers
344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Huddart, Steven & Hughes, John S. & Brunnermeier, Markus, 1999.
"Disclosure requirements and stock exchange listing choice in an international context,"
Journal of Accounting and Economics,
Elsevier, vol. 26(1-3), pages 237-269, January.
- John S. Hughes & Steven Huddart & Markus K Brunnermeier, 1998. "Disclosure Requirements and Stock Exchange Listing Choice in an International Context," FMG Discussion Papers dp282, Financial Markets Group.
- Foucault, Thierry & Gehrig, Thomas, 2006.
"Stock price informativeness, cross-listings and investment decisions,"
Les Cahiers de Recherche
840, HEC Paris.
- Foucault, Thierry & Gehrig, Thomas, 2008. "Stock price informativeness, cross-listings, and investment decisions," Journal of Financial Economics, Elsevier, vol. 88(1), pages 146-168, April.
- Foucault, Thierry & Gehrig, Thomas, 2006. "Stock Price Informativeness, Cross-Listings and Investment Decisions," CEPR Discussion Papers 5722, C.E.P.R. Discussion Papers.
- Schotman, Peter C & Zalewska, Ania, 2005. "Non-synchronous Trading and Testing for Market Integration in Central European Emerging Markets," CEPR Discussion Papers 5352, C.E.P.R. Discussion Papers.
- Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September.
- Eun, Cheol S & Janakiramanan, S, 1986. " A Model of International Asset Pricing with a Constraint on the Foreign Equity Ownership," Journal of Finance, American Finance Association, vol. 41(4), pages 897-914, September.
- Malcolm Baker & Jeffrey Wurgler, 2002.
"Market Timing and Capital Structure,"
Journal of Finance,
American Finance Association, vol. 57(1), pages 1-32, 02.
- Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 169-215, February.
- Stephen R Foerster & G Andrew Karolyi, 1993. "International Listings of Stocks: The Case of Canada and the U.S," Journal of International Business Studies, Palgrave Macmillan, vol. 24(4), pages 763-784, December.
- Oren Fuerst, 1998. "A Theoretical Analysis of the Investor Protection Regulations Argument for Global Listing of Stocks," Yale School of Management Working Papers ysm106, Yale School of Management.
- Alexander, Gordon J & Eun, Cheol S & Janakiramanan, S, 1987. " Asset Pricing and Dual Listing on Foreign Capital Markets: A Note," Journal of Finance, American Finance Association, vol. 42(1), pages 151-58, March.
- Avanidhar Subrahmanyam & Sheridan Titman, 1999. "The Going-Public Decision and the Development of Financial Markets," Journal of Finance, American Finance Association, vol. 54(3), pages 1045-1082, 06.
- Michael Melvin & Magali Valero, 2007.
"The Dark Side of International Cross-Listing: Effects on Rival Firms at Home,"
CESifo Working Paper Series
2174, CESifo Group Munich.
- Michael Melvin & Magali Valero, 2009. "The Dark Side of International Cross-Listing: Effects on Rival Firms at Home," European Financial Management, European Financial Management Association, vol. 15(1), pages 66-91.
- Chemmanur, Thomas J. & Fulghieri, Paolo, 2006. "Competition and cooperation among exchanges: A theory of cross-listing and endogenous listing standards," Journal of Financial Economics, Elsevier, vol. 82(2), pages 455-489, November.
- G. Geoffrey Booth & Raymond So, 2003. "Intraday volatility spillovers in the German equity index derivatives markets," Applied Financial Economics, Taylor and Francis Journals, vol. 13(7), pages 487-494.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Hasbrouck, Joel, 1995. " One Security, Many Markets: Determining the Contributions to Price Discovery," Journal of Finance, American Finance Association, vol. 50(4), pages 1175-99, September.
- Frank J. Fabozzi & Radu Tunaru & Tony Wu, 2004. "Modeling Volatility for the Chinese Equity Markets," Annals of Economics and Finance, Society for AEF, vol. 5(1), pages 79-92, May.
- Tor-Erik Bakke & Toni M. Whited, 2010. "Which Firms Follow the Market? An Analysis of Corporate Investment Decisions," Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1941-1980.
- Tinic, Seha M & West, Richard R, 1974. "Marketability of Common Stocks in Canada and the U.S.A.: A Comparison of Agent versus Dealer Dominated Markets," Journal of Finance, American Finance Association, vol. 29(3), pages 729-46, June.
- Hamao, Yasushi & Masulis, Ronald W & Ng, Victor, 1990. "Correlations in Price Changes and Volatility across International Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 281-307.
- Chowdhry, Bhagwan & Nanda, Vikram, 1991. "Multimarket Trading and Market Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 483-511.
- Pinegar, J. Michael & Ravichandran, R., 2003. "U. S. Investors' Perceptions of Corporate Control in Mexico: Evidence from Sibling ADRs," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 213-230, March.
- Michael R. King & Dan Segal, 2004. "International Cross-Listing and the Bonding Hypothesis," Working Papers 04-17, Bank of Canada.
- Stapleton, R C & Subrahmanyam, Marti G, 1977. "Market Imperfections, Capital Market Equilibrium and Corporation Finance," Journal of Finance, American Finance Association, vol. 32(2), pages 307-19, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.