Cross listing: price discovery dynamics and exchange rate effects

Cristina M. Scherrer (cscherrer@creates.au.dk)
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Cristina M. Scherrer: Aarhus University and CREATES, Postal: Department of Economics and Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: The paper investigates the dynamics of price discovery for cross-listed firms and the impact of exchange rate shocks on firm value. A simple price discovery model is proposed in which prices in the home and foreign markets react to shocks on two latent prices, namely, the efficient firm value and the efficient exchange rate. I disentangle the effects on firm value from the exchange rate from the other determinants of a firm's cash flow. I use high-frequency data and find that a depreciation/appreciation of the home currency decreases/increases firm value. This finding is consistent with currency fluctuation affecting discount rates.

Keywords: price discovery; exchange rate; market microstructure; structural VECM; high frequency data (search for similar items in EconPapers)
JEL-codes: C32 F31 G12 G14 G15 G32 (search for similar items in EconPapers)
Pages: 47
Date: 2014-12-10
New Economics Papers: this item is included in nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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