The Transmission of Pricing Information of Dually-Listed Stocks

We use the daily opening and closing prices of eighteen dually-listed Hong Kong companies to investigate the transfer of pricing information between the Stock Exchange of Hong Kong (SEHK) and the London Stock Exchange (LSE). Evidence shows that (1) SEHK overnight returns respond significantly to change in LSE intraday returns, but the transmission process is not completed at the opening of the SEHK; (2) LSE overnight returns respond significantly to changes in SEHK intraday returns, but the transmission process is not completed at the opening of the LSE, either; (3) the impact is stronger moving from the LSE to the SEHK. This evidence indicates that information transfer runs in both directions and that most of the transmitted information continues to be processed throughout the following trading day (JEL G15).