Ripples Through Markets: Inter-market Impacts Generated by Large Trades
Indiana University Bloomington - Department of Finance
July 5, 2004
Indiana University Working Paper
This paper investigates the impacts of very large trades for cross-listed companies where parallel markets suffer from information frictions. We use a sample of large trades executed on London Stock Exchange's SEAQ-I market for European cross-quoted firms and investigate their impact on home market prices when transparency is opaque. We find that (a) London large trades produce price impacts in home markets even though no timely information is published, (b) market makers appear to pre- and postposition their inventories by splitting orders across markets, and (c) the price discovery process across markets changes significantly around large trades with the foreign market making a significantly bigger contribution to price discovery, even though information opaqueness exists.
Number of Pages in PDF File: 33
Keywords: Cross-listed companies, information across markets, transparency, large trades
JEL Classification: G14, G15, G18working papers series
Date posted: March 2, 2005
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