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Price discovery in dual‐class shares across multiple markets
Author(s) -
Fernandes Marcelo,
Scherrer Cristina M.
Publication year - 2018
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21889
Subject(s) - price discovery , futures contract , dual (grammatical number) , economics , class (philosophy) , context (archaeology) , financial economics , econometrics , short interest ratio , monetary economics , computer science , artificial intelligence , art , paleontology , literature , biology
This paper proposes a new measure of price discovery that uses the spectral decomposition. The methodology is especially important in the context of large price systems, such as interest rate parities with spot and futures contracts or dual‐class shares in multiple markets. We employ high frequency data to study price discovery in dual‐class Brazilian stocks and their ADRs. We find that the foreign market is at least as informative as the home market and that shocks in the dual‐class premium entail a permanent effect in normal times, but transitory in periods of financial distress