Information Processing on Equity Prices and Exchange Rate for Cross Listed Stocks

Abstract

This paper investigates the dynamics of information processing for equity prices and the exchange rate of cross-listed firms. Using high-frequency data and a novel structural setting, I disentangle the effects on firm value of the exchange rate from the other determinants of a firm's cash flow. In general, the results suggest that the foreign market is faster than the home market and that there is a net positive relationship between the value of the domestic currency and the firm's value. This result is linked to the likely partially segmented market characteristic of the home market. Robustness checks confirm the results.

Keywords: Price Discovery, High Frequency Data, Structural VECM, Exchange Rate

JEL Classification: G15, G12, G14, G32, C32, F31