Market Quality around Macroeconomic News Announcements: Evidence from the US and Canadian Markets

31 Pages Posted: 10 Nov 2016

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

Yiuman Tse

University of Missouri at Saint Louis

Date Written: September 12, 2016

Abstract

We investigate changes in market quality in the United States and Canada during macroeconomic news announcements. We measure market quality in terms of the cost of trading, pricing errors, and returns dependence. Using a sample of cross-listed stocks and stock index futures, we provide robust evidence that market quality is higher in the United States than in Canada. We observe that, around announcement periods, transaction costs increase more in Canada than in the United States, suggesting that the US market offers better liquidity. More information is also incorporated into the US market. The pattern of intraday serial dependence in returns reveals that it takes investors about five minutes less to react to order imbalances in the United States than in Canada. The differences between the US and Canadian results using index futures are generally more significant than those based on cross-listed stocks, indicating that index futures are better than stocks at providing market-wide information.

Keywords: Cross-Listings, Market Microstructure, Market Quality

JEL Classification: C32, G15

Suggested Citation

Frijns, Bart and Indriawan, Ivan and Tourani-Rad, Alireza and Tse, Yiuman, Market Quality around Macroeconomic News Announcements: Evidence from the US and Canadian Markets (September 12, 2016). Available at SSRN: https://ssrn.com/abstract=2867167 or http://dx.doi.org/10.2139/ssrn.2867167

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

Yiuman Tse

University of Missouri at Saint Louis ( email )

1 University Blvd.
St Louis, MO 63121
United States

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