Application and Empirical Study of Price Discovery Model：Evidence from Hong Kong、Australian and Japanese ADRs
Date Issued
2007
Date
2007
Author(s)
Kuo, Cheng-Liang
DOI
zh-TW
Abstract
This paper examines the price discovery between the Hong Kong, Australian and Japanese stocks and their American Depositary Receipts (ADR) with two well-known common factor models, the permanent-transitory model proposed by Gonzalo and Granger (1995) and information share model proposed by Hasbrouck (1995).Due to the nonsynchronicity of closing prices, the research target will be put on the two-way comparison of closing prices and opening prices.
Regardless of the ADR opening prices versus underlying stocks closing prices or vice versa, empirical tests of both the permanent-transitory model and information share model show that the contribution of the domestic market to the price discovery is higher. In the meanwhile, Granger causality test reveals that the domestic market takes the lead in information flow. To sum up, the domestic market of Hong Kong, Australia and Japan possess better information response and control ability than American market. In addition, we find that the trading volume is direct proportional to the contribution of price discovery.
Subjects
永久-暫時模型
價格發現
Price Discovery
Permanent-Transitory Model
Information Shares model
ADR
Type
thesis
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