Cross-Listing and Transmission of Pricing Information of Dually-Listed Stocks: A New Approach Using Wavelet Analysis

Francis In and Sangbae Kim
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Francis In: Monash University, Australia
Sangbae Kim: Kyungpook National University, Korea

Chapter 5 in An Introduction to Wavelet Theory in Finance:A Wavelet Multiscale Approach, 2012, pp 87-104 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractIn this chapter, we propose a new approach for investigating how returns and volatilities of dually-listed stocks interact on two non-synchronous Hong Kong and London stocks markets. The proposed method is based on a wavelet multiscale approach that decomposes a given time series on a scale-by-scale basis. Empirical results show that the transmission of information between the HKEx and LSE markets runs in both directions for contemporaneous spillover effects, regardless of the different time scales and trading volumes. Second, for the lagged spillover effects, the impact is stronger moving from the HKEx to the LSE, confirming that trading in the London market plays a limited role in the transfer of pricing information of the Hong Kong market, especially at the shorter time scales. However, at the longer time scales, the evidence shows that the transmission of information runs in both directions, regardless of the different trading volumes.

Keywords: Wavelets; Finance; Economics; Wavelet Analysis; Multiscaling Method (search for similar items in EconPapers)
Date: 2012
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