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Where is the Market? Evidence from Cross-Listings in the U.S

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We explore two main questions. First, can two markets for a company’s shares coexist and, if so, what determines the distribution of trading volume across them? For firms cross-listed in the U.S. we find that in most cases U.S. trading is a significant fraction of total volume, and tends to be larger for companies based in countries that are geographically close, with low financial development and poor anti-insider trading protection. Moreover, the relative size of the U.S. market is larger if the company is small, volatile and high-tech. Second, we ask whether developing an active foreign market entails lower domestic trading activity. We find that for firms based in developed markets, the domestic turnover rate increases in the wake of cross-listing and remains permanently higher. In contrast, emerging market firms tend to experience a decrease in domestic trading activity.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 129.

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Date of creation: 01 Nov 2004
Date of revision: 01 Dec 2006
Publication status: Published in Review of Financial Studies, 2008, vol. 21(2), pages 725-761
Handle: RePEc:sef:csefwp:129
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  1. 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.
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