International Transfer of Pricing Information between Dually Listed Stocks
Journal of Financial Research, Vol. 21, No. 2, pp. 139-157, Summer 1998
19 Pages Posted: 9 Apr 1998 Last revised: 8 Oct 2013
Recent years have witnessed the proliferation of multiple-listed stocks traded in markets around the world. Any explanation for this phenomenon must address the question of efficiency with which pricing information flows among national markets. By the same token, the phenomenon of multiple listing offers a unique opportunity to study the efficiency of information transmission across national markets in general. The information gained from observing a given stock priced in multiple markets is distinct from that which may be learned from relationships of aggregate price indices across markets. This paper investigates five companies based in Israel whose stocks are listed both on the Tel Aviv Stock Exchange and NASDAQ. Our empirical tests of causality in price changes use two methods for analyzing data. The first method consists of five steps in which univariate and bivariate Box-Jenkins (1970) ARIMA models are identified and estimated. Those models serve to generate one-step-ahead out-of-sample forecasts. The second method uses Sims' (1980) vector autoregression (VAR) model. Our overall interpretation of the results is that price causality in dually-listed stocks is unidirectional, from the domestic market to the foreign market.
Keywords: dual listing, multiple stock listing, international portfolio
JEL Classification: G11, G12, G14, G15
Suggested Citation: Suggested Citation