Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85902
Authors: 
Menkveld, Albert J.
Koopman, Siem Jan
Lucas, André
Year of Publication: 
2003
Series/Report no.: 
Tinbergen Institute Discussion Paper 03-037/2
Abstract: 
U.S. trading in non-U.S. stocks has grown dramatically. Round-the-clock, these stocks trade in the home market, in the U.S. marketand, potentially, in both markets simultaneously. We use a state space model to study 24-hour price discovery. As opposed to thestandard variance ratio'' approach, this model deals naturally with (i) simultaneous quotes in an overlap, (ii) missing observations in anon-overlap, (iii) noise due to transitory microstructure effects, and (iv) contemporaneous correlation in returns due to market-widefactors. For NYSE-listed Dutch stocks, home market hours are a factor three more informative than U.S. market hours, which, inturn, are twice as informative as overnight hours. Surprisingly, strongest price discovery takes place in the NYSE preopening. Themodel shows results that are significantly different from the variance ratio approach.
Subjects: 
price discovery
cross-list
round-the-clock
24-hour
ADR
international.
JEL: 
G1
G15
G14
Document Type: 
Working Paper

Files in This Item:
File
Size
428.31 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.