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Information, Trading and Stock Returns: Lessons from Dually-Listed Securities

  • K.C. Chan
  • Wai-Ming Fong
  • Rene M. Stulz

This paper compares the intra-day patterns on the NYSE and AMEX of volatility, trading volume and bid-ask spreads for European dually- listed stocks, Japanese dually-listed stocks also listed in London, and Japanese dually-listed stocks not listed in London with American stocks of comparable average trading volume and volatility. It is shown that the intra-day patterns for these stocks are remarkably similar even though the public information flows differ markedly across these stocks during the trading day. In the morning, Japanese stocks have the greatest volatility and volume, followed by European stocks and American stocks. These rankings are reversed in the afternoon. We argue that these patterns are consistent with markets reacting to the overnight accumulation of public information which is greatest for Japanese stock and smallest for American stocks and inconsistent with the view that early morning volatility can be attributed to monopolistic specialist behavior.

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File URL: http://www.nber.org/papers/w4743.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4743.

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Date of creation: May 1994
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Publication status: published as Chan, K. C. & Fong, Wai-Ming & Kho, Bong-Chan & Stulz, ReneM. "Information, trading and stock returns: Lessons from dually-listed securities," Journal of Banking & Finance, Elsevier, vol. 20(7), pages 1161-1187, August 1996.
Handle: RePEc:nbr:nberwo:4743
Note: AP
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
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  8. Foster, F Douglas & Viswanathan, S, 1993. " Variations in Trading Volume, Return Volatility, and Trading Costs: Evidence on Recent Price Formation Models," Journal of Finance, American Finance Association, vol. 48(1), pages 187-211, March.
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  10. Allan W. Kleidon & Ingrid M. Werner, 1993. "Round-the-clock Trading: Evidence from U.K. Cross-Listed Securities," NBER Working Papers 4410, National Bureau of Economic Research, Inc.
  11. Amihud, Yakov & Mendelson, Haim, 1991. " Volatility, Efficiency, and Trading: Evidence from the Japanese Stock Market," Journal of Finance, American Finance Association, vol. 46(5), pages 1765-89, December.
  12. 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.
  13. Barclay, Michael J & Litzenberger, Robert H & Warner, Jerold B, 1990. "Private Information, Trading Volume, and Stock-Return Variances," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 233-53.
  14. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  15. Hasbrouck, Joel, 1991. "The Summary Informativeness of Stock Trades: An Econometric Analysis," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 571-95.
  16. Stoll, Hans R & Whaley, Robert E, 1990. "Stock Market Structure and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 37-71.
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