Multi-market trading and arbitrage☆

Gagnon, Louis; Karolyi, G. Andrew

doi:10.1016/j.jfineco.2010.03.005

Cited by 220 publications

(150 citation statements)

References 71 publications

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“…The price spread is negatively related to the demand elasticity of arbitrageurs and positively related to the transaction cost, consistent with the empirical findings of Gagnon and Karolyi (2010).…”

Section: Definesupporting

confidence: 88%

Synchronous Price Discovery of Cross-Listings

Chen¹,

Choi²

2014

Management Science and Financial Engineering

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Extending from Grossman and Stiglitz (1980), we provide an asset pricing model of a synchronously traded crosslisted pair under information asymmetry. Following Garbade and Silber (1983), the model further embraces multimarket price discovery in a dynamic framework. The implications are as follows: The price sensitivity of holdings is higher for informed traders than for uninformed traders; the largest cross-border price spread occurs in the absence of arbitrageurs; price discovery is more likely in markets with a larger population of informed traders; and parity convergence accelerates with a higher price elasticity of demand of arbitrageurs.

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Section: Definesupporting

confidence: 88%

Synchronous Price Discovery of Cross-Listings

Chen¹,

Choi²

2014

Management Science and Financial Engineering

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“…First, the existing literature suggests that because they impede arbitrage, holding costs can partially explain the price differences between ADRs and their underlying stocks (Gagnon & Karolyi, 2010;Grossman et al, 2007). Unlike transaction costs which are incurred only when a purchase/sale is completed, holding costs are incurred every period that an arbitrage position remains open.…”

Section: Methodsmentioning

confidence: 99%

“…Following Gagnon and Karolyi (2010), the quarterly deviation, Deviationi,t, is defined as the average of the daily deviations between the ADR and its underlying stock as follows:…”

Section: A Measures Employedmentioning

confidence: 99%

“…Yet, this is not always the case, and price deviations between ADRs and their underlying stocks arise. The existing literature attributes these deviations to different sources including exchange rate expectations, transaction costs, consumer sentiment, holding costs, macroeconomic events, domestic trading volume, and liquidity (Eichler, Karmann, & Malritz, 2009;Kadiyala & Kadiyala, 2004;Grossman, Ozuna, & Simpson, 2007;Gagnon & Karolyi, 2010;Hsu & Wang, 2008;Chan, Jain, & Xia, 2008). Prices must also be adjusted by the conversion ratio.…”

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confidence: 99%

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The Role of Liquidity in ADR Mispricing: Evidence from Latin America

Hales¹

2015

Glob Bus Financ Rev

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“…Gagnon and Karolyi (2010) find that transactions/holding costs can influence deviations from price-parity for cross-listed stocks. This implies that holding costs/transactions costs could also influence the ratio of non-US trade to US trade.…”

mentioning

confidence: 88%

Exchange trading rules, governance, and trading location of cross-listed stocks

Cumming

Hou

2015

The European Journal of Finance

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This paper shows stock exchange trading rules are of central importance for the trading location of cross-listed stocks. We consider various measures of sovereign governance and shareholder rights across countries to assess other legal and institutional drivers of trading activity. The data indicate that the proportion of trades that occurs on an exchange increases at a decreasing rate with the number of stock exchange trading rules. The effectiveness of stock exchange rules increases with the strength of regulatory institutions. Further, recent trading rule regulatory reforms pertaining to MIFID and RegNMS affect trading location.

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Multi-market trading and arbitrage☆

Cited by 220 publications

References 71 publications

Synchronous Price Discovery of Cross-Listings

Synchronous Price Discovery of Cross-Listings

The Role of Liquidity in ADR Mispricing: Evidence from Latin America

Exchange trading rules, governance, and trading location of cross-listed stocks

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