The Role of U.S. Trading in Pricing Internationally Cross-Listed Stocks

Download or read book The Role of U.S. Trading in Pricing Internationally Cross-Listed Stocks written by Joachim Grammig and published by . This book was released on 2004 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This paper addresses two issues: 1) where does price discovery occur for firms that are traded simultaneously in the U.S. and in their home markets and 2) what explains the differences across firms in the share of price discovery that occurs in the U.S? The answer to the first question is that the home market is typically where the majority of price discovery occurs, but there are significant exceptions to this rule and the nature of price discovery across international markets during the time of trading overlap is richer and more complex that previously realized. For the second question, the results provide strong support that liquidity is an important factor. For a particular firm, the greater the liquidity of U.S. trading relative to the home market, the greater the role for U.S. price discovery.