Stock Market Trading in Space and Time: Information and HSBC Share Prices in New York, London and Hong Kong, 2006-2009

Abstract

This paper investigates the circulation of information on secondary stock markets, using the case study of HSBC shares traded on the exchanges in New York, London, and Hong Kong. The distribution of price discovery is analysed across the three markets, within a 24-hour cycle of trading, and in the period between 2006 and 2009, showing a clear relationship with the distribution of private information about HSBC. London, the seat of HSBC headquarters, home to most of its decision makers and key business relationships, dominates price discovery. Hong Kong, the former home of HSBC and hub of its Asian operations is second. New York, unable to rival London or Hong Kong’s access to private information about HSBC, is last. Its role in price formation was particularly weak during the financial crisis, when confidence in publicly available information was at its lowest. The role of Hong Kong increases over time. As its Group Chief Executive Officer is relocating from London to Hong Kong, HSBC is returning to its Chinese roots. Trading activity and price discovery for HSBC shares may follow suit.

Keywords: information, stock market, price discovery, HSBC, financial centres

JEL Classification: D8, G01, G12, G15