The informational role of cross‐border trading: Evidence from the intraday price discovery in China

Kalok Chan and Yuan Lu

International Review of Finance, 2025, vol. 25, issue 1

Abstract: We examine intraday information flows between shares cross‐listed in Hong Kong and Shanghai. The relative trading volume in Hong Kong (Shanghai) is positively related to the relative contribution to price discovery, based on Hasbrouck (1995) Information Share. Northbound trading by Hong Kong investors has a greater contribution to price discovery than southbound trading by Mainland Chinese investors. We construct a few measures of intraday market qualities: (1) probability of informed trading; (2) intraday effective spread; (3) pricing error; and (4) intraday volatility ratio. Evidence indicates that northbound trading and institutional southbound trading, but not retail southbound trading, are informed and improve pricing efficiency.

Date: 2025
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International Review of Finance is currently edited by Bruce D. Grundy, Naifu Chen, Ming Huang, Takao Kobayashi and Sheridan Titman

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