Macroeconomic News Announcements and Price Discovery: Evidence from Canadian-U.S. Cross-Listed Firms

37 Pages Posted: 3 Dec 2015

See all articles by Bart Frijns

Bart Frijns

Auckland University of Technology - Faculty of Business & Law

Ivan Indriawan

Auckland University of Technology - Department of Finance

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law

Date Written: February 1, 2014

Abstract

This study employs macroeconomic news announcements as proxy for new information arrivals and examines their impact on price discovery of Canadian cross-listed stocks. We compare the price discovery of 38 Canadian companies listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE) for the period 2004-2011. First, we observe that price discovery shifts significantly during macroeconomic news announcement days. Second, the U.S. market becomes more important in terms of price discovery, regardless of the origin of the news. Third, we examine the relation between price discovery and market microstructure variables. After controlling for liquidity shocks, we find that the impact of news announcements still persists. Intraday analyses of price discovery on periods surrounding news releases further support these findings. These results suggest that there is a difference in information-processing capability of the two markets, with the U.S. market being better at processing information than the Canadian market during macro-economic news announcements. Our results are consistent with the literature which shows that cross-listing in the U.S. is positively associated with an improvement in the stock price information environment.

Keywords: Market Microstructure, Price Discovery, Macroeconomic News Announcements, Cross-listed Stocks

JEL Classification: C32, C58, E44

Suggested Citation

Frijns, Bart and Indriawan, Ivan and Tourani-Rad, Alireza, Macroeconomic News Announcements and Price Discovery: Evidence from Canadian-U.S. Cross-Listed Firms (February 1, 2014). Journal of Empirical Finance, Vol. 32, 2015. Available at SSRN: https://ssrn.com/abstract=2697830

Bart Frijns

Auckland University of Technology - Faculty of Business & Law ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand

Ivan Indriawan (Contact Author)

Auckland University of Technology - Department of Finance ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand

Register to save articles to
your library

Register

Paper statistics

Downloads
41
Abstract Views
358
PlumX Metrics