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Ripples Through Markets: Inter-market Impacts Generated by Large Trades

Andrew Ellul

Indiana University - 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, G18

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Date posted: March 2, 2005  

Suggested Citation

Ellul, Andrew, Ripples Through Markets: Inter-market Impacts Generated by Large Trades (July 5, 2004). Indiana University Working Paper. Available at SSRN: http://ssrn.com/abstract=675321 or http://dx.doi.org/10.2139/ssrn.675321

Contact Information

Andrew Ellul (Contact Author)
Indiana University - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
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References:  35
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