We develop a new model of multimarket trading to explain the differences in the for- eign share of trading volume of internationally cross-listed stocks. The model predicts that the trading volume of a cross-listed stock is proportionally higher on the exchange in which the cross-listed asset returns have greater correlation with returns of other assets traded on that market. We find robust empirical support for this prediction using stock return and volume data on 251 non-U.S. stocks cross-listed on major U.S. exchanges.
Baruch, S.n., Lemmon, M., Karolyi, A. (2007). Multimarket trading and liquidity: Theory and evidence. THE JOURNAL OF FINANCE, 62(5), 2169-2200 [10.1111/j.1540-6261.2007.01272.x].
Multimarket trading and liquidity: Theory and evidence
Shmuel Baruch;
2007-01-01
Abstract
We develop a new model of multimarket trading to explain the differences in the for- eign share of trading volume of internationally cross-listed stocks. The model predicts that the trading volume of a cross-listed stock is proportionally higher on the exchange in which the cross-listed asset returns have greater correlation with returns of other assets traded on that market. We find robust empirical support for this prediction using stock return and volume data on 251 non-U.S. stocks cross-listed on major U.S. exchanges.| File | Dimensione | Formato | |
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