Trading location and equity returns: Evidence from US trading of British cross-listed firms

Jun Chen, Yiuman Tse and Michael Williams

Journal of International Financial Markets, Institutions and Money, 2009, vol. 19, issue 5, 729-741

Abstract: Our study examines market sentiment and the importance of trading location in British American Depository Receipts (ADRs) traded in the US. Perfect integration between UK markets and UK ADRs is ruled out given that UK ADRs exhibit an intraday, U-shaped volatility curve. Both a variance decomposition analysis and an EGARCH model show that UK ADR returns are driven more by US market returns than US-traded UK ETF returns. These results indicate the existence of US market sentiment for UK ADRs and that trading location influences pricing behavior.

Keywords: Trading; location; Cross-listed; stocks; ADRs (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:19:y:2009:i:5:p:729-741

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