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International Transfer Of Pricing Information Between Dually Listed Stocks

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  • Shmuel Hauser
  • Yael Tanchuma
  • Uzi Yaari

Abstract

International multiple listing offers a unique opportunity to study the efficiency of information transmission across national markets. The knowledge gained from observing a stock of the same company priced in multiple markets differs from what may be gained from observing relations across markets of aggregate price indices. We investigate five companies based in Israel whose stocks are listed on both the Tel Aviv Stock Exchange and NASDAQ. Our empirical tests of causality in price changes use the side-by-side Box-Jenkins ARIMA models and the Sims VAR model. Overall, the results show that price causality in dually listed stocks is unidirectional from the domestic market to the foreign market.

Suggested Citation

  • Shmuel Hauser & Yael Tanchuma & Uzi Yaari, 1998. "International Transfer Of Pricing Information Between Dually Listed Stocks," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(2), pages 139-157, June.
    • Handle: RePEc:bla:jfnres:v:21:y:1998:i:2:p:139-157
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    File URL: http://hdl.handle.net/10.1111/j.1475-6803.1998.tb00677.x
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    2. Xu, Xiaoqing Eleanor & Fung, Hung-Gay, 2005. "Cross-market linkages between U.S. and Japanese precious metals futures trading," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(2), pages 107-124, April.
    3. Partha Ray & Vinodh Madhavan, 2014. "Price and Volatility Linkages between Indian Stocks and their European GDRs," Proceedings of International Academic Conferences 0300812, International Institute of Social and Economic Sciences.
    4. Yaseen S. Alhaj-Yaseen & Dana Ladd, 2019. "Which sentiments do US investors follow when trading ADRs?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(3), pages 506-527, July.
    5. Palani‐Rajan Kadapakkam & Lalatendu Misra, 2003. "Return Linkages between Dual Listings under Arbitrage Restrictions: A Study of Indian Stocks and Their London Global Depositary Receipts," The Financial Review, Eastern Finance Association, vol. 38(4), pages 611-633, November.
    6. Richard Podpiera, 2001. "International Cross-Listing: The Effects of Market Fragmentation and Information Flows," CERGE-EI Working Papers wp173, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    7. Vinodh Madhavan & Partha Ray, 2019. "Price and Volatility Linkages Between Indian Stocks and Their European GDRs," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 18(2_suppl), pages 213-237, August.
    8. Qadan, Mahmoud, 2018. "Switches in price discovery: Are U.S. traders more qualified in making valuations?," The North American Journal of Economics and Finance, Elsevier, vol. 44(C), pages 221-234.
    9. Lieberman, Offer & Ben-Zion, Uri & Hauser, Shmuel, 1999. "A characterization of the price behavior of international dual stocks: an error correction approach," Journal of International Money and Finance, Elsevier, vol. 18(2), pages 289-304, February.
    10. Chris Motengwe & Angel Pardo, 2016. "Major International Information Flows Across the Safex Wheat Market," South African Journal of Economics, Economic Society of South Africa, vol. 84(4), pages 636-653, December.
    11. Ramiah, Vikash & Cheng, Ka Yeung & Orriols, Julien & Naughton, Tony & Hallahan, Terrence, 2011. "Contrarian investment strategies work better for dually-traded stocks: Evidence from Hong Kong," Pacific-Basin Finance Journal, Elsevier, vol. 19(1), pages 140-156, January.
    12. Poshakwale, Sunil S. & Aquino, Katty Pérez, 2008. "The dynamics of volatility transmission and information flow between ADRs and their underlying stocks," Global Finance Journal, Elsevier, vol. 19(2), pages 187-201.
    13. Alaganar, Vaira T. & Bhar, Ramaprasad, 2002. "Information and volatility linkage under external shocks: Evidence from dually listed Australian stocks," International Review of Financial Analysis, Elsevier, vol. 11(1), pages 59-71.
    14. Shmuel Hauser & Azriel Levy, 1998. "Efficiency of Price Discovery in Thinly Traded Stocks: Evidence from Dual Listings in Tel Aviv and the OTC," Multinational Finance Journal, Multinational Finance Journal, vol. 2(2), pages 133-149, June.
    15. Alhaj-Yaseen, Yaseen S. & Lam, Eddery & Barkoulas, John T., 2014. "Price discovery for cross-listed firms with foreign IPOs," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 80-87.
    16. Chng, Michael T., 2009. "Economic linkages across commodity futures: Hedging and trading implications," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 958-970, May.
    17. Sharma, Shahil, 2017. "Oil price shocks and American depositary receipt stock returns," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1040-1056.
    18. Alaganar, V. T. & Bhar, Ramaprasad, 2001. "Diversification gains from American depositary receipts and foreign equities: evidence from Australian stocks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 11(1), pages 97-113, March.
    19. Pascual-Fuster, Bartolome & Perez-Rodriguez, Jorge V., 2007. "Volatility transmission for cross-listed firms and the role of international exposure," Japan and the World Economy, Elsevier, vol. 19(3), pages 303-328, August.
    20. Lim, Lee K., 2008. "A cointegration analysis of price transmission between ADRs and dually listed South Korean stocks," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 78(2), pages 200-208.

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