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Multi-Market Trading and Cross-Asset Integration

80 Pages Posted: 16 Sep 2015 Last revised: 16 May 2017

Patrick Augustin

McGill University, Desautels Faculty of Management

Feng Jiao

University of Lethbridge - Faculty of Management

Sergei Sarkissian

McGill University; Yerevan State University

Michael J. Schill

University of Virginia ­ Darden School of Business

Date Written: April 20, 2017

Abstract

We study how trading in multiple markets affects cross-asset price dynamics. Using a global sample of cross-listed securities and credit default swaps (CDS), we find that foreign listing improves firm stock-CDS return synchronicity, reduces capital structure arbitrage opportunities, and leads to a greater integration of CDS with the world equity and bond markets. Our findings support the theories of investor attention, as the results are stronger for firms with greater media attention, analyst coverage, search intensity, and for listings in more familiar markets. Thus, we propose that cross-market integration improves cross-asset integration through increased investor attention and firm visibility.

Keywords: G12, G13, G14, G15

JEL Classification: Investor recognition; Limits to arbitrage; Return co-movement; Risk premium

Suggested Citation

Augustin, Patrick and Jiao, Feng and Sarkissian, Sergei and Schill, Michael J., Multi-Market Trading and Cross-Asset Integration (April 20, 2017). Darden Business School Working Paper No. 2660829. Available at SSRN: https://ssrn.com/abstract=2660829 or http://dx.doi.org/10.2139/ssrn.2660829

Patrick Augustin

McGill University, Desautels Faculty of Management ( email )

1001 Sherbrooke Street West
Quebec
Montreal, Quebec H3A 1G5
Canada

HOME PAGE: http://www.patrickaugustin.se

Feng Jiao

University of Lethbridge - Faculty of Management ( email )

4401 University Drive
Lethbridge, Alberta TIK 3M4
Canada

Sergei Sarkissian (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)

Yerevan State University

1 Alex Manoogian Street
Yerevan, 0025
Armenia

Michael J. Schill

University of Virginia ­ Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm

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