International Cross-Listing and Price Discovery under Trading Concentration in the Domestic Market: Evidence from Japanese Shares

34 Pages Posted: 14 Jan 2013 Last revised: 7 Nov 2013

See all articles by Yoichi Otsubo

Yoichi Otsubo

University of Manchester - Alliance Manchester Business School

Date Written: July 4, 2013

Abstract

This study examines the role for the Tokyo and the New York Stock Exchange in price discovery for Japanese shares. The two markets' trading hours do not overlap and the trading volume concentrates in Tokyo. State space model approach is employed to investigate the contribution and the efficiency of price discovery. We find that the size of information incorporated in prices observed at Tokyo is greater than in New York. More than 90% of the information is incorporated during the trading hours in the domestic market. In contrast the speed of incorporating information into prices is faster in New York than in Tokyo. New York takes less than half of what Tokyo takes to incorporate information. Our simulation suggests that the contribution on price discovery by New York Stock Exchange would be non-trivial if the two markets open simultaneously.

Keywords: international cross-listing, market microstructure, price discovery

JEL Classification: G14, G15

Suggested Citation

Otsubo, Yoichi, International Cross-Listing and Price Discovery under Trading Concentration in the Domestic Market: Evidence from Japanese Shares (July 4, 2013). Available at SSRN: https://ssrn.com/abstract=2200329 or http://dx.doi.org/10.2139/ssrn.2200329

Yoichi Otsubo (Contact Author)

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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