Price transmission dynamics between informationally linked securities

Kate Phylaktis and Gikas Manalis

Applied Financial Economics, 2005, vol. 15, issue 3, 187-201

Abstract: The paper examines whether location of trade matters in the pricing of internationally listed securities by examining the price dynamics of stocks listed on the Greek and the two German stock exchanges, Frankfurt and Berlin. Through the investigation of the various possibilities of short-run and long-run arbitrage profits it is found that the prices of stocks in the German markets are priced with reference to the Greek market, implying that the location of trade does not matter and that there is a certain degree of market integration. In contrast, it is found that the price discovery process takes place in the German markets, although most of the trading volume is concentrated in the Greek market.

Date: 2005
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DOI: 10.1080/0960310042000306970

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