Testing for micro-structure effects of international dual listings using intraday data |
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| Institution: | 1. Arizona State University — West, Phoenix, AZ, USA;2. Department of Finance, Leavey School of Business, Santa Clara University, Santa Clara, CA 95053, USA;1. School of Economics and Management, Shanxi University, Taiyuan, China;2. Department of Economics, Pusan National University, Busan, Republic of Korea;1. Deim Department of Economics and Business, University of Tuscia, Via del Paradiso 47, 01100, Viterbo, Italy;2. Ceis Foundation, University of Rome Tor Vergata, Via Columbia 2, 00133, Rome, Italy;3. Universita'' degli Studi di Ferrara, Via Ludovico Ariosto, 35 44121 - Ferrara, Italy;4. University of Roma Tre, Via Silvio D''Amico 77, Rome, Italy;5. Department of Economic Theory and Economic Management Methods, V.N. Karazin Kharkiv National University, Mironosyts''ka str., 1, 61002, Kharkiv, Ukraine;6. University of Rome Tor Vergata, Italy;1. School of Business University of the Thai Chamber of Commerce, Bangkok, Thailand;2. Quality Engineer at JDA Software Pvt Ltd, India;3. Department of Mechanical and Industrial Engineering, Northeastern University, Boston, USA;1. Applied Economics Department, University of Oviedo, Avda. Cristo s/n, 33003, Oviedo, Spain;2. Science and Technology Department, Universidad Nacional de Quilmes and CONICET, R.S. Pena 180, 1876 Bernal, Buenos Aires, Argentina |
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| Abstract: | This paper examines the impact on the liquidity of NYSE/AMEX listed stocks when they were subsequently listed on the London or the Tokyo Stock Exchanges. It can be argued that the increased competition from foreign market makers will reduce the monopoly rents that specialists can earn, thereby improving their quotes. We find, however, that spreads do not decrease following a dual listing, though the depth of the quotes increases as predicted. The apparent increase in depth disappears once we account for changes in price, volume and return variance. We also find that the level of informed trading increases, which increases the cost to the specialist of providing liquidity, and explains why spreads do not decline in spite of increased competition. Consistent with an increase in informed trading, we also document an increase in trading activity. |
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