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Information Spillover, Profit Opportunities, and Return Deviations Analysis: The Case of Cross-Listed BHP Billiton

Author

Listed:
  • Roger Su

    (Auckland University of Technology, New Zealand)

  • Ronghua Yi

    (China Jiliang University, China)

  • Keith Hooper

    (Auckland University of Technology, New Zealand)

  • Amitabh Dutta

    (Florida Institute of Technology, U.S.A.)

Abstract

This paper examines (1) whether a cross-listed company spillover effect starts from an earlier time zone market to a later time zone market, whether investors can find profit opportunities from cross-listed share trading, and (2) whether the magnitude of cross-listed share performance deviations can be sufficiently explained by market fundamental factors. BHP Billiton, the world's largest mining company, is listed on both Australian and UK stock exchanges and has become a perfect example to be examined for the above two hypotheses. We analyze BHP and BLT daily share price returns from 2001 to 2011 and most available Australian and UK market fundamental factors in the same period. With regression analysis, we find evidence that a spillover effect may start from the earlier time zone. Our findings partly support that investors can get arbitrage profit from cross-listed shares when they hold a medium-term position; in the short term, there is no strong evidence to show BHP and BLT prices will converge. Furthermore, we haven't found any evidence that any individual market fundamental factor can sufficiently explain the magnitude of cross-listed share performance deviations.

Suggested Citation

  • Roger Su & Ronghua Yi & Keith Hooper & Amitabh Dutta, 2013. "Information Spillover, Profit Opportunities, and Return Deviations Analysis: The Case of Cross-Listed BHP Billiton," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 12(2), pages 155-170, December.
  • Handle: RePEc:ijb:journl:v:12:y:2013:i:2:p:155-170
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    References listed on IDEAS

    as
    1. You, Leyuan & Parhizgari, Ali M. & Srivastava, Suresh, 2012. "Cross-listing and subsequent delisting in foreign markets," Journal of Empirical Finance, Elsevier, vol. 19(2), pages 200-216.
    2. Bianconi, Marcelo & Tan, Liang, 2010. "Cross-listing premium in the US and the UK destination," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 244-259, April.
    3. Froot, Kenneth A. & Dabora, Emil M., 1999. "How are stock prices affected by the location of trade?," Journal of Financial Economics, Elsevier, vol. 53(2), pages 189-216, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    spillover; BHP Billiton; arbitrage; cross listing;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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