Cross Return, Volatility and Order Imbalance in International Cross-Listings
Date Issued
2008
Date
2008
Author(s)
CHEN, PEI-SHIN
Abstract
The globalization of financial markets motivates plenty of non-U.S. companies listing their shares on the U.S. stock exchanges. Eun and Sabherwal(2003) mentioned that there is a significant effect of price discovery on both domestic and foreign stock exchanges through cross-listing. We run multi-linear regressions to examine if there is a significant effect on the relationship between the current cross-board stock return and order imbalances. In our practical study, we discovered that current imbalance in home/foreign exchanges has a significant influence on the current stock return in foreign/home. Because American stock exchange plays a leading role in the global financial market, the direction of information delivery is from America to Canada.n addition, we applied GARCH (1, 1) model to test our cross-border samples on both the TSX and NYSE. We found that there is a significant influence of theontemporaneous order imbalance in domestic/foreign markets on the volatility of the stock return in foreign/domestic markets. The contemporaneous order imbalance in home/alien markets does not have a significant impact on the stock returns in alien/home markets. The insignificance for effect of order imbalance to the cross-board return represents limited capital flow between America and Canada.
Subjects
cross-listing
order imbalance
volatility
Type
thesis
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