Price Discovery of Internationally Cross-Listed Stocks During the 2008 Financial Crisis
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
Date Written: April 24, 2018
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: Suggested Citation