Trading Hours, Information Flow and International Cross- Listing
Posted: 9 Mar 2008
We analyze the volatility of information-related price changes of NYSE stocks that are traded in London and/or Tokyo, British and Japanese stocks that are cross-listed on the NYSE, and similar stocks that are not traded abroad. Examination of the impact of a security's primary and cross listings on the relative variance of daytime and overnight NYSE returns indicates that: (i) among stocks with identical overall listings, the rate of information flow into the prices of Japanese and British stocks is significantly less than that of U.S. stocks during NYSE trading hours; (ii) the rate of information flow into the prices of U.S. stocks when the NYSE is closed is greater for U.S. stocks cross-listed in Tokyo than non-cross-listed U.S. stocks, but not for U.S. stocks cross-listed in London; and (iii) the rate of information flow into the prices of foreign stocks during NYSE trading hours is greater, the greater is their NYSE volume. These results are consistent with the hypotheses that (a) both public and private information flow into prices at a greater rate when a stock's primary market is open than when it is closed, even if off-shore trading opportunities are available; and (b) foreign trading does facilitate price discovery if there is sufficient trading activity in the foreign market.
JEL Classification: G15
Suggested Citation: Suggested Citation