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Does information vault Niagara Falls? Cross-listed trading in New York and Toronto

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  • Chen, Haiqiang
  • Choi, Paul Moon Sub

Abstract

We document differential private information in cross-border asset pricing using the probability of informed trading (PIN) for Canadian shares traded on both sides of Niagara Falls. Relative to the New York Stock Exchange (NYSE), the Toronto Stock Exchange (TSX) has more informed trades and a larger information share. This cross-border information imbalance is associated with small but positive price premiums in New York as predicted by a model. The dynamics of these premiums depends on trade informativeness. Lastly, the PIN for TSX trading typically rises upon cross-listing on the NYSE, which is consistent with the negative event-study response.

Suggested Citation

  • Chen, Haiqiang & Choi, Paul Moon Sub, 2012. "Does information vault Niagara Falls? Cross-listed trading in New York and Toronto," Journal of Empirical Finance, Elsevier, vol. 19(2), pages 175-199.
    • Handle: RePEc:eee:empfin:v:19:y:2012:i:2:p:175-199
    DOI: 10.1016/j.jempfin.2012.01.001
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    More about this item

    Keywords

    Cross-listing; Probability of informed trading; Information share; Price discovery; Convergence speed; Bid–ask spread;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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