Market Quality around Macroeconomic News Announcements: Evidence from the US and Canadian Markets

Bart Frijns, Ivan Indriawan, Alireza Tourani‐Rad and Yiuman Tse
Authors registered in the RePEc Author Service: Alireza Tourani-Rad

International Review of Finance, 2019, vol. 19, issue 3, 575-612

Abstract: We investigate changes in market quality in the US and Canada during macroeconomic news announcements. We measure market quality in terms of returns dependence, the cost of trading, and pricing errors. Using a sample of cross‐listed stocks and macroeconomic news from both countries, we document that market quality is generally higher in the US than in Canada. The pattern of intraday serial dependence in returns reveals that it takes investors about 5 min less to react to order imbalances in the US than in Canada. We further observe that, around announcement periods, transaction costs increase more in Canada than in the US, suggesting that the US market offers better liquidity. More information is also incorporated into the US market. These results support the view that the US is a prime target for cross‐listing, and are robust to different types of assets and time specifications.

Date: 2019
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