Price Discovery and the Effects of Fragmentation on Market Quality

Download or read book Price Discovery and the Effects of Fragmentation on Market Quality written by Vassilios G. Papavassiliou and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a novel high-frequency data set, we examine the contribution of Greek trading to the price discovery process of a pair of Cypriot blue-chip, cross-listed stocks during overlapping trading hours. Additionally, we investigate the effects of market fragmentation on the home market's quality, as measured by microstructure-based liquidity measures. Contrary to earlier studies from other markets, our findings show that foreign stock exchanges can act as the leading contributors to price discovery and can concentrate the majority of trading activity and produce the lowest transaction costs. Our results also show that market fragmentation can lead to negative effects on market liquidity.