PRICE DISCOVERY OF INTERNATIONALLY CROSS‐LISTED STOCKS DURING THE 2008 FINANCIAL CRISIS

Jimmy Lockwood, Larry Lockwood and Sie Ting Lau
Authors registered in the RePEc Author Service: Jimmy Lockwood

Journal of Financial Research, 2018, vol. 41, issue 3, 351-381

Abstract: Studies of cross‐listings show home markets dominate price discovery and point to informational advantages of local investors. However, we show price discovery gravitates to markets with better order execution quality and find home markets do not dominate price discovery. Instead, price discovery is more evenly split, especially for emerging markets. Order execution quality determines the dominant market as price discovery shifts 22% when order execution advantages reverse between home and foreign markets. Thus, markets with poor execution quality act more as satellite markets, adjust to more liquid markets, and play a diminished role in the pricing of cross‐listed stocks.

Date: 2018
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https://doi.org/10.1111/jfir.12151

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