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

See all articles by Shmuel Hauser

Shmuel Hauser

Ben-Gurion University of the Negev - School of Management; Government of the State of Israel - Israel Securities Authority

Yael Tanchuma

Israel Securities Authority

Uzi Yaari

Rutgers University; School of Business-Camden

Abstract

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

Hauser, Shmuel and Tanchuma, Yael and Yaari, Uzi, International Transfer of Pricing Information between Dually Listed Stocks. Journal of Financial Research, Vol. 21, No. 2, pp. 139-157, Summer 1998, Available at SSRN: https://ssrn.com/abstract=74919

Shmuel Hauser

Ben-Gurion University of the Negev - School of Management ( email )

P.O. Box 653
Beer-Sheva 84105
Israel
+972 2 651 3939 (Phone)
+972 7 6472896 (Fax)

Government of the State of Israel - Israel Securities Authority

22 Kanfei Nesharim Street
Jerusalem 95464
Israel

Yael Tanchuma

Israel Securities Authority

22 Kanfei Nesharim Street
Jerusalem 95464
Israel

Uzi Yaari (Contact Author)

Rutgers University ( email )

School of Business
Camden, NJ 08102
United States
610-664-2086 (Phone)

HOME PAGE: http://camden-sbc.rutgers.edu/FacultyStaff/Directory/yaari.htm

School of Business-Camden ( email )

Rutgers University
227 Penn Street
Camden, NJ 08102
United States
610-664-2086 (Phone)
610-664-2198 (Fax)

HOME PAGE: http://camden-sbc.rutgers.edu/FacultyStaff/Directory/yaari.htm

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