The transmission of pricing information of dually-listed stocks
Author(s)
Author(s)
Bae, K.-H.
Cha, B.
Date Issued
1999
Publisher
John Wiley & Sons
Journal
Journal of Business Finance & Accounting
Volume
26
Issue
5-6
Start page
709
End page
723
Abstract
This article investigates the transfer of pricing information using the daily opening and closing prices of eighteen Hong Kong firms that are dually listed in the Stock Exchange of Hong Kong (SEHK) and the London Stock Exchange (LSE). The use of dually-listed stock returns allows us to address the issue of information flows between national stock markets more precisely than using index returns. Our findings are: SEHK overnight returns respond significantly to changes in LSE intraday returns, but the transmission process is not completed at the opening of the SEHK; 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; the impact is stronger moving from the LSE to the SEHK. This evidence indicates that information transfer occurs both immediately and continuously throughout the trading day in both directions. The lagged spillover effect of intraday returns in one exchange on intraday returns in the other exchange is puzzling. Although it does not appear that traders could profit from the lagged price reactions, the evidence documented in this study is not consistent with what one would expect from efficient markets. One plausible explanation behind this unexpected discovery is that opening prices in computing intraday returns may be stale.
SFU Affiliated Publication
No
Availability at SFU Library
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