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Cross‐Border Listings and Price Discovery: Evidence from U.S.‐Listed Canadian Stocks
Author(s) -
Eun Cheol S.,
Sabherwal Sanjiv
Publication year - 2003
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/1540-6261.00537
Subject(s) - price discovery , stock exchange , sample (material) , share price , economics , financial economics , monetary economics , business , cross listing , stock price , stock (firearms) , econometrics , geography , finance , chemistry , biology , series (stratigraphy) , paleontology , corporate governance , archaeology , chromatography , futures contract
ABSTRACT We examine the contribution of cross‐listings to price discovery for a sample of Canadian stocks listed on both the Toronto Stock Exchange (TSE) and a U.S. exchange. We find that prices on the TSE and U.S. exchange are cointegrated and mutually adjusting. The U.S. share of price discovery ranges from 0.2 percent to 98.2 percent, with an average of 38.1 percent. The U.S. share is directly related to the U.S. share of trading and to the ratio of proportions of informative trades on the U.S. exchange and the TSE, and inversely related to the ratio of bid‐ask spreads.