Price Discovery of Internationally Cross-Listed Stocks During the 2008 Financial Crisis

Journal of Financial Research, Vol. 41, No. 3, 2018

Lockwood, J. , Lockwood, L. and Lau, S. T. (2018), PRICE DISCOVERY OF INTERNATIONALLY CROSS‐LISTED STOCKS DURING THE 2008 FINANCIAL CRISIS. The Journal of Financial Research, 41: 351-381. doi:10.1111/jfir.12151

53 Pages Posted: 8 Jul 2016 Last revised: 16 Oct 2019

See all articles by Jimmy Lockwood

Jimmy Lockwood

Southern Illinois University at Carbondale - Department of Finance

Larry J. Lockwood

Texas Christian University

Sie Ting Lau

Nanyang Technological University (NTU) - Division of Banking & Finance

Date Written: April 24, 2018

Abstract

Studies of cross-listings show home markets dominate price discovery and point to informational advantages of local investors. However, we show price discovery gravitates to markets with better order execution quality and find home markets do not dominate price discovery. Instead, price discovery is more evenly split, especially for emerging markets. The dominant market is determined by order execution as price discovery shifts 22% when order execution advantages reverse between home and foreign markets. Thus, markets with poor execution quality act more as satellite markets, adjusting to more liquid markets, and play a diminished informational role in the pricing of cross-listed stocks.

Keywords: price discovery, market microstructure, financial crisis, international financial markets

JEL Classification: G01, G14, G15, G18

Suggested Citation

Lockwood, Jimmy and Lockwood, Larry J. and Lau, Sie Ting, Price Discovery of Internationally Cross-Listed Stocks During the 2008 Financial Crisis (April 24, 2018). Journal of Financial Research, Vol. 41, No. 3, 2018, Lockwood, J. , Lockwood, L. and Lau, S. T. (2018), PRICE DISCOVERY OF INTERNATIONALLY CROSS‐LISTED STOCKS DURING THE 2008 FINANCIAL CRISIS. The Journal of Financial Research, 41: 351-381. doi:10.1111/jfir.12151, Available at SSRN: https://ssrn.com/abstract=2805760 or http://dx.doi.org/10.2139/ssrn.2805760

Jimmy Lockwood (Contact Author)

Southern Illinois University at Carbondale - Department of Finance ( email )

Mail Code 4626
Carbondale, IL 62901-4626
United States
682.305.6095 (Phone)

HOME PAGE: http://https://business.siu.edu/people/finance/lockwood.html

Larry J. Lockwood

Texas Christian University ( email )

Fort Worth, TX 76129
United States
817-921-7420 (Phone)
817-921-7227 (Fax)

Sie Ting Lau

Nanyang Technological University (NTU) - Division of Banking & Finance ( email )

S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore
65 790 6051 (Phone)
65 791 3697 (Fax)

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