A Tale of Two Prices: Liquidity and Asset Prices in Multiple Markets

Chan, Justin S. P.; Hong, Dong Pyo; Subrahmanyam, Marti G.

doi:10.2139/ssrn.685841

Cited by 16 publications

(12 citation statements)

References 49 publications

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“…Thus, changes in premium could reflect changes in fund liquidity (as expense ratios rarely change). A similar argument has been empirically tested by Chan, Hong, and Subrahmanyam (2008) in the context of cross-listed (ADR) stocks. The authors find that changes in ADR premiums (calculated relative to their home market share prices) are positively related to ADR liquidity relative to home share liquidity.…”

Section: Information Diffusionmentioning

confidence: 63%

Liquidity Clienteles, Correlated Demand and the Excess Comovement of Exchange-Traded Fund Returns

Broman

2013

SSRN Journal

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Section: Information Diffusionmentioning

confidence: 63%

Liquidity Clienteles, Correlated Demand and the Excess Comovement of Exchange-Traded Fund Returns

Broman

2013

SSRN Journal

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“…Arbitrage opportunities can provide an additional motivation for sophisticated traders to engage in multimarket trading (Baruch, Karolyi, and Lemmon (2007)). Gagnon and Karolyi (2010a) document that mispricings between the shares of the same firm trading in its domestic market and a cross-listing market occasionally occur (see also Chan, Hong and Subrahmanyam (2008)), and Menkveld (2008) finds evidence of arbitrage activity in intraday trading. Gagnon and Karolyi (2010a) also find that arbitrage is impeded by institutional and informational barriers that prevent arbitrageurs from fully eliminating mispricings between markets.…”

Section: Background and Hypothesis Developmentmentioning

confidence: 97%

Volume Dynamics and Multimarket Trading

Halling

Moulton

Panayides

2013

J. Financ. Quant. Anal.

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The trading of shares of the same firm in multiple markets has become common over the last 30 years, but there is little empirical evidence on the extent to which investors actively exploit multimarket environments. We introduce a volume-based measure of multimarket trading to address this question. Analyzing a large set of cross-listed firms, we find higher multimarket trading among markets with similar designs and strong enforcement of insider trading laws and for firms with higher institutional ownership. These findings are important for firms evaluating the benefits of cross listing and for markets competing for order flow.

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“…The riskier a stock, the greater will be its expected returns. Nevertheless, Datar et al, (1998) and Chan et al, (2008) argue that the more liquid stocks have higher returns. It is, therefore, difficult to foresee the meaning of the relationship between stock returns and spreads.…”

Section: Stock Returnsmentioning

confidence: 99%

Investigation of the Effect of Earnings Management on Stock Liquidity for the Case of the Tunisian Stock Exchange

Sayari¹

2018

IJAT

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Earnings management has often been percieved as manipulating financial statements in view of mistaking stakeholders about the firm's economic performance or influencing contractual relationships founded on accounting figures. In this study, we examine the relationship between disclosed accounting information quality and stocks liquidity. To this end, we examine a sample of 220 observations of Tunisian listed companies over the 2007-2016 period. The results indicate that there is a negative relationship between accounting information quality measured by quality of accruals and stocks liquidity. Our study aimsat examining the Tunisian context and tries to determine the effect of earnings management on stocks liquidity.The relationship between liquidity(via the ask-bid spread) and accruals was examined, usingtwo modified earnings management measurementmodels: modified model of Jones (1995)and model of Kothariet al. (2005). Considering the discretionary component of accounting accruals in the relationship between a firm's stocks liquidity and its accruals is a new controversialtopic. Using a panel data qualitative approach, the obtained results point to a positive relationship between discretionary accruals and Tunisian firms'ask-bid spread (as estimated by the two measurement models). This indicates that discretionary accruals allow Tunisian investors to optimally construct their stocksportfolios. The collected results also highlighted a negative and a significant impact of transaction size and volume on firms'ask-bid spread. Indeed, earnings management allows for increasingstocks uidity when discretionary accruals are negative and reducingtheir liquidity when these accruals are positive. This is confirmed by the two discretionary accrualsmodels.

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A Tale of Two Prices: Liquidity and Asset Prices in Multiple Markets

Cited by 16 publications

References 49 publications

Liquidity Clienteles, Correlated Demand and the Excess Comovement of Exchange-Traded Fund Returns

Liquidity Clienteles, Correlated Demand and the Excess Comovement of Exchange-Traded Fund Returns

Volume Dynamics and Multimarket Trading

Investigation of the Effect of Earnings Management on Stock Liquidity for the Case of the Tunisian Stock Exchange

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