Information Flows across Markets: Evidence from China–Backed Stocks Dual–Listed in Hong Kong and New York

Using a bivariate generalized autoregressive conditional heteroskedasticity (GARCH) model, we examine patterns of information flows for China–backed stocks that are cross–listed on exchanges in Hong Kong and New York. Results analyzing the dual–listed stocks indicate significant mutual feedback of information between domestic (Hong Kong) and offshore (New York) markets in terms of pricing and volatility. Stocks listed on the domestic market appear to play a more significant role of information transmission in the pricing process, whereas stocks listed on the offshore market play a bigger role in volatility spillover.     

Exogenous and Endogenous Attention and the Convergence of Analysts’ Forecasts

The propensity of the forecasts of sell-side financial analysts to converge (or diverge) is a function of their exogenous and endogenous selective attention and overconfidence. When returns are negative, the endogenous form of selective attention—a static measure of analysts’ goal-driven attention at a particular point in time—has a positive association with convergence. The exogenous form of selective attention—a relatively involuntary dynamic process of exogenous attentional shift driven by external changes in the market over time—is associated with a tendency for forecasts to diverge.     

Covered interest arbitrage profits: The role of liquidity and credit risk

We study the profitability of Covered Interest Parity (CIP) arbitrage violations and their relationship with market liquidity and credit risk using a novel and unique dataset of tick-by-tick firm quotes for all financial instruments involved in the arbitrage strategy. The empirical analysis shows that positive CIP arbitrage deviations include a compensation for liquidity and credit risk. Once these risk premia are taken into account, small arbitrage profits only accrue to traders who are able to negotiate low trading costs. The results are robust to stale pricing and the nonsynchronous trading occurring in the markets involved in the arbitrage strategy.     

On a rank-order test for the equality of probability of an event

Abstract

The following situation is considered. A fixed number (= n) or sequence of independent trials T ₁ T ₂,…, T _n is given, and in each of these an event E mayor may not occur, It is further observed that the event E occurs a total of k times amongst the n trials T _i , (i = l,…, n). It is then required to test the hypothesis H ₀ that the probability of the occurrence of E is constant from trial to trial, i.e. H ₀ is the hypothesis: p ₁ = p ₂ = ? = p _n = p, if p _n (i = 1, …, n) represents the probability that E occurs on the ith trial.