Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2003-05-23
Revision-Date: 2003-10-13
Number: 03-037/2
Author-Name: Albert J. Menkveld
Author-Email: ajmenkveld@feweb.vu.nl
Author-Workplace-Name: Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam
Author-Name: Siem Jan Koopman
Author-Email: s.j.koopman@feweb.vu.nl
Author-Workplace-Name: Econometrics and Operational Research, FEWEB, Vrije Universiteit Amsterdam
Author-Name: André Lucas
Author-Email: alucas@feweb.vu.nl
Author-Workplace-Name: Financing and Business Management for the Financial Sector, FEWEB, Vrije Universiteit Amsterdam
Title: Round-the-Clock Price Discovery for Cross-Listed Stocks: US-Dutch Evidence
Abstract: U.S. trading in non-U.S. stocks has grown dramatically. Round-the-clock, these stocks trade in the home market, in the U.S. marketand, potentially, in both markets simultaneously. We use a state space model to study 24-hour price discovery. As opposed to thestandard "variance ratio'' approach, this model deals naturally with (i) simultaneous quotes in an overlap, (ii) missing observations in anon-overlap, (iii) noise due to transitory microstructure effects, and (iv) contemporaneous correlation in returns due to market-widefactors. For NYSE-listed Dutch stocks, home market hours are a factor three more informative than U.S. market hours, which, inturn, are twice as informative as overnight hours. Surprisingly, strongest price discovery takes place in the NYSE preopening. Themodel shows results that are significantly different from the variance ratio approach.
Classification-JEL: G1; G15; G14.
Keywords: price discovery; cross-list; round-the-clock; 24-hour; ADR; international.
File-Url: https://papers.tinbergen.nl/03037.pdf
File-Format: application/pdf
File-Size: 438585 bytes
Handle: RePEc:tin:wpaper:20030037