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Cross-listing, price discovery and the informativeness of the trading process

  • Pascual, Roberto
  • Pascual-Fuster, Bartolome
  • Climent, Francisco

This paper analyzes the price discovery process of securities that trade at multiple markets with trading sessions that totally or partially overlap. Building on Hasbrouck (1995) information share approach, we introduce a methodology that distinguishes two sources of information asymmetries between markets: trade-related and trade-unrelated informative shocks. This approach determines how much of each market?s relative contribution to the price discovery process during the overlapping period is attributable to its own trading activity. We provide empirical evidence on the contribution of the NYSE in the price discovery process of the Spanish cross-listed stocks during the daily two-hour overlapping interval. Este trabajo analiza el proceso de formación del precio de acciones negociadasen varios mercados con sesiones de negociación total o parcialmente solapadas. A partirdel modelo propuesto por Hasbrouck (1995), introducimos una metodología quedistingue dos fuentes de asimetría de información entre los mercados: la inferida a partirde la negociación de cada mercado e información ajena a la negociación. El objetivo esdeterminar en qué medida la contribución relativa de cada mercado al proceso deformación del precio durante el período de solapamiento es relevante y que parte de estaes atribuible a su propia actividad de negociación. Se obtiene evidencia empírica de lacontribución del NYSE en el proceso de formación del precio de las acciones españolasdurante el intervalo de dos horas de solapamiento diario.

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Article provided by Elsevier in its journal Journal of Financial Markets.

Volume (Year): 9 (2006)
Issue (Month): 2 (May)
Pages: 144-161

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Handle: RePEc:eee:finmar:v:9:y:2006:i:2:p:144-161
Contact details of provider: Web page: http://www.elsevier.com/locate/finmar

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