Quote Dynamics of Cross-Listed Stocks

Frijns, B., Indriawan, I., & Tourani‐Rad, A. (2019). Quote dynamics of cross‐listed stocks. International Review of Finance.

35 Pages Posted: 3 Dec 2015 Last revised: 13 Apr 2020

See all articles by Bart Frijns

Bart Frijns

Open University of the Netherlands - School of Management

Ivan Indriawan

University of Adelaide

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law

Date Written: November 1, 2019

Abstract

We develop a model to assess the quote dynamics of stocks listed in multiple markets. This model allows us to explain the price formation mechanism and the degree of information spillover. We show that this model can be transformed to assess the dynamics of the spreads, the efficient price, and the market's relative premium for cross-listed stocks. Applying our model to a sample of 64 Canadian companies listed in the U.S. and Canada, we document strong intermarket competition among liquidity providers; prices mainly adjust to trades in their respective market, suggesting some degree of informational frictions; and U.S. trades have a greater price impact than Canadian trades. We further find that the U.S. market is informationally dominant due to its more competitive quote-setting behavior and larger incorporation of informational shocks.

Keywords: Market Microstructure, Error-correction, Quote Dynamics, Cross-listings

JEL Classification: C32, G15

Suggested Citation

Frijns, Bart and Indriawan, Ivan and Tourani-Rad, Alireza, Quote Dynamics of Cross-Listed Stocks (November 1, 2019). Frijns, B., Indriawan, I., & Tourani‐Rad, A. (2019). Quote dynamics of cross‐listed stocks. International Review of Finance., Available at SSRN: https://ssrn.com/abstract=2697831 or http://dx.doi.org/10.2139/ssrn.2697831

Bart Frijns

Open University of the Netherlands - School of Management ( email )

Valkenburgerweg 177
Heerlen, NL-6401DL
Netherlands

Ivan Indriawan (Contact Author)

University of Adelaide ( email )

No 233 North Terrace, School of Commerce
Adelaide, South Australia 5005
Australia

HOME PAGE: http://https://sites.google.com/site/ivanindriawan/home

Alireza Tourani-Rad

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

3 Wakefield Street
Private Bag 92006
Auckland Central 1020, Auckland 1010
New Zealand

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