IDEAS home Printed from https://ideas.repec.org/a/eee/intfin/v19y2009i3p550-564.html
   My bibliography  Save this article

Liquidity minimization and cross-listing choice: Evidence based on Canadian shares cross-listed on U.S. venues

Author

Listed:
  • Kryzanowski, Lawrence
  • Lazrak, Skander

Abstract

This paper examines whether a Canadian-listed firm seeking to cross-list in the U.S. needs to consider liquidity differences when making a choice among the main U.S. venues (AMEX, NYSE or NASDAQ). After controlling for firm characteristics, we find that trade costs for Canadian shares cross-listed in the U.S. do not depend on the U.S. cross-listing venue. This suggests that the choice of U.S. listing venue may be better motivated by the desire to minimize listing fees or to increase investor recognition and visibility.

Suggested Citation

  • Kryzanowski, Lawrence & Lazrak, Skander, 2009. "Liquidity minimization and cross-listing choice: Evidence based on Canadian shares cross-listed on U.S. venues," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(3), pages 550-564, July.
    • Handle: RePEc:eee:intfin:v:19:y:2009:i:3:p:550-564
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1042-4431(08)00044-9
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Shalen, Catherine T, 1993. "Volume, Volatility, and the Dispersion of Beliefs," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 405-434.
    2. Tse, Yiuman & Devos, Erik, 2004. "Trading costs, investor recognition and market response: An analysis of firms that move from the Amex (Nasdaq) to Nasdaq (Amex)," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 63-83, January.
    3. Chakravarty, Sugato, 2001. "Stealth-trading: Which traders' trades move stock prices?," Journal of Financial Economics, Elsevier, vol. 61(2), pages 289-307, August.
    4. Christie, William G & Schultz, Paul H, 1994. "Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-1840, December.
    5. Lee, Charles M C & Mucklow, Belinda & Ready, Mark J, 1993. "Spreads, Depths, and the Impact of Earnings Information: An Intraday Analysis," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 345-374.
    6. Tarun Chordia & Richard Roll & Avanidhar Subrahmanyam, 2001. "Market Liquidity and Trading Activity," Journal of Finance, American Finance Association, vol. 56(2), pages 501-530, April.
    7. Bessembinder, Hendrik, 2003. "Issues in assessing trade execution costs," Journal of Financial Markets, Elsevier, vol. 6(3), pages 233-257, May.
    8. Harris, Lawrence, 1986. "Cross-Security Tests of the Mixture of Distributions Hypothesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(1), pages 39-46, March.
    9. Bessembinder, Hendrik & Seguin, Paul J., 1993. "Price Volatility, Trading Volume, and Market Depth: Evidence from Futures Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(1), pages 21-39, March.
    10. Jones, Charles M & Kaul, Gautam & Lipson, Marc L, 1994. "Transactions, Volume, and Volatility," The Review of Financial Studies, Society for Financial Studies, vol. 7(4), pages 631-651.
    11. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(1), pages 109-126, March.
    12. Chan, Louis K C & Lakonishok, Josef, 1997. "Institutional Equity Trading Costs: NYSE versus Nasdaq," Journal of Finance, American Finance Association, vol. 52(2), pages 713-735, June.
    13. Kryzanowski, Lawrence & Zhang, Hao, 2002. "Intraday Market Price Integration for Shares Cross-Listed Internationally," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(2), pages 243-269, June.
    14. Noronha, Gregory M. & Sarin, Atulya & Saudagaran, Shahrokh M., 1996. "Testing for micro-structure effects of international dual listings using intraday data," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 965-983, July.
    15. Harris, Lawrence E, 1994. "Minimum Price Variations, Discrete Bid-Ask Spreads, and Quotation Sizes," The Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 149-178.
    16. Anne‐Marie Anderson & Edward A. Dyl, 2005. "Market Structure And Trading Volume," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 28(1), pages 115-131, March.
    17. Fama, Eugene F. & French, Kenneth R., 1988. "Dividend yields and expected stock returns," Journal of Financial Economics, Elsevier, vol. 22(1), pages 3-25, October.
    18. Lee, Charles M C & Ready, Mark J, 1991. "Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-746, June.
    19. G. Andrew Karolyi, 2006. "The World of Cross-Listings and Cross-Listings of the World: Challenging Conventional Wisdom," Review of Finance, European Finance Association, vol. 10(1), pages 99-152.
    20. Christie, William G & Harris, Jeffrey H & Schultz, Paul H, 1994. "Why Did NASDAQ Market Makers Stop Avoiding Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1841-1860, December.
    21. Bessembinder, Hendrik & Kaufman, Herbert M., 1997. "A Comparison of Trade Execution Costs for NYSE and NASDAQ-Listed Stocks," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(3), pages 287-310, September.
    22. Henker, Thomas & Wang, Jian-Xin, 2006. "On the importance of timing specifications in market microstructure research," Journal of Financial Markets, Elsevier, vol. 9(2), pages 162-179, May.
    23. Barclay, Michael J. & Warner, Jerold B., 1993. "Stealth trading and volatility : Which trades move prices?," Journal of Financial Economics, Elsevier, vol. 34(3), pages 281-305, December.
    24. Clyde, Paul & Schultz, Paul & Zaman, Mir, 1997. "Trading Costs and Exchange Delisting: The Case of Firms That Voluntarily Move from the American Stock Exchange to the Nasdaq," Journal of Finance, American Finance Association, vol. 52(5), pages 2103-2112, December.
    25. Tinic, Seha M & West, Richard R, 1974. "Marketability of Common Stocks in Canada and the U.S.A.: A Comparison of Agent versus Dealer Dominated Markets," Journal of Finance, American Finance Association, vol. 29(3), pages 729-746, June.
    26. Li Jiang & Lawrence Kryzanowski, 1997. "Trading Activity, Quoted Liquidity, and Stock Volatility," Multinational Finance Journal, Multinational Finance Journal, vol. 1(3), pages 199-227, September.
    27. Harris, Milton & Raviv, Artur, 1993. "Differences of Opinion Make a Horse Race," The Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 473-506.
    28. Darrat, Ali F. & Rahman, Shafiqur & Zhong, Maosen, 2003. "Intraday trading volume and return volatility of the DJIA stocks: A note," Journal of Banking & Finance, Elsevier, vol. 27(10), pages 2035-2043, October.
    29. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-155, January.
    30. Peterson, Mark & Sirri, Erik, 2003. "Evaluation of the biases in execution cost estimation using trade and quote data," Journal of Financial Markets, Elsevier, vol. 6(3), pages 259-280, May.
    31. Michael Halling & Marco Pagano & Otto Randl & Josef Zechner, 2008. "Where Is the Market? Evidence from Cross-Listings in the United States," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 725-761, April.
    32. Chowdhry, Bhagwan & Nanda, Vikram, 1991. "Multimarket Trading and Market Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 483-511.
    33. Hans R. Stoll, 2000. "Presidential Address: Friction," Journal of Finance, American Finance Association, vol. 55(4), pages 1479-1514, August.
    34. Michael J. Barclay & William G. Christie & Jeffrey H. Harris & Eugene Kandel & Paul H. Schultz, 1999. "Effects of Market Reform on the Trading Costs and Depths of Nasdaq Stocks," Journal of Finance, American Finance Association, vol. 54(1), pages 1-34, February.
    35. Allen B. Atkins & Edward A. Dyl, 1997. "Market Structure And Reported Trading Volume: Nasdaq Versus The Nyse," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(3), pages 291-304, September.
    36. Bessembinder, Hendrik, 1999. "Trade Execution Costs on NASDAQ and the NYSE: A Post-Reform Comparison," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(3), pages 387-407, September.
    37. Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1992. "Stock Prices and Volume," The Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 199-242.
    38. Franck Bancel & Cusha Mittoo, 2001. "European Managerial Perceptions of the Net Benefits of Foreign Stock Listings," European Financial Management, European Financial Management Association, vol. 7(2), pages 213-236, June.
    39. Foerster, Stephen R. & Karolyi, G. Andrew, 1998. "Multimarket trading and liquidity: a transaction data analysis of Canada-US interlistings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 393-412, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. He, Yinghua & Nielsson, Ulf & Guo, Hong & Yang, Jiong, 2014. "Subscribing to transparency," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 189-206.
    2. Mona Mortazian, 2022. "Liquidity and Volatility of Stocks Moved from the Main Market to the Alternative Investment Market (AIM)," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(2), pages 195-220, June.
    3. Roosenboom, Peter & van Dijk, Mathijs A., 2009. "The market reaction to cross-listings: Does the destination market matter?," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1898-1908, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jinliang Li & Chunchi Wu, 2006. "Daily Return Volatility, Bid-Ask Spreads, and Information Flow: Analyzing the Information Content of Volume," The Journal of Business, University of Chicago Press, vol. 79(5), pages 2697-2740, September.
    2. Chan, Choon Chat & Fong, Wai Mun, 2006. "Realized volatility and transactions," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 2063-2085, July.
    3. Jinliang Li, 2016. "When noise trading fades, volatility rises," Review of Quantitative Finance and Accounting, Springer, vol. 47(3), pages 475-512, October.
    4. Koubaa, Yosra & Slim, Skander, 2019. "The relationship between trading activity and stock market volatility: Does the volume threshold matter?," Economic Modelling, Elsevier, vol. 82(C), pages 168-184.
    5. Randi Naes & Johannes A. Skjeltorp, 2003. "Strategic Investor Behaviour and the Volume-Volatility Relation in Equity Markets," Working Paper 2003/9, Norges Bank.
    6. Alexander, Gordon J. & Peterson, Mark A., 2007. "An analysis of trade-size clustering and its relation to stealth trading," Journal of Financial Economics, Elsevier, vol. 84(2), pages 435-471, May.
    7. Kryzanowski, Lawrence & Rubalcava, Arturo, 2005. "International trade-venue clienteles and order-flow competitiveness," Journal of Financial Intermediation, Elsevier, vol. 14(1), pages 86-113, January.
    8. Chuang, Wen-I & Liu, Hsiang-Hsi & Susmel, Rauli, 2012. "The bivariate GARCH approach to investigating the relation between stock returns, trading volume, and return volatility," Global Finance Journal, Elsevier, vol. 23(1), pages 1-15.
    9. Barakat, Ahmed & Chernobai, Anna & Wahrenburg, Mark, 2014. "Information asymmetry around operational risk announcements," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 152-179.
    10. Tse, Yiuman & Devos, Erik, 2004. "Trading costs, investor recognition and market response: An analysis of firms that move from the Amex (Nasdaq) to Nasdaq (Amex)," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 63-83, January.
    11. Mahmoud Qadan & David Y. Aharon, 2019. "The length of the trading day and trading volume," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 9(2), pages 137-156, June.
    12. Biais, Bruno & Glosten, Larry & Spatt, Chester, 2005. "Market microstructure: A survey of microfoundations, empirical results, and policy implications," Journal of Financial Markets, Elsevier, vol. 8(2), pages 217-264, May.
    13. Dang, Viet Anh & Michayluk, David & Pham, Thu Phuong, 2018. "The curious case of changes in trading dynamics: When firms switch from NYSE to NASDAQ," Journal of Financial Markets, Elsevier, vol. 41(C), pages 17-35.
    14. Goodhart, Charles A. E. & O'Hara, Maureen, 1997. "High frequency data in financial markets: Issues and applications," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 73-114, June.
    15. Koski, Jennifer Lynch, 1998. "Measurement Effects and the Variance of Returns after Stock Splits and Stock Dividends," The Review of Financial Studies, Society for Financial Studies, vol. 11(1), pages 143-162.
    16. Do, Hung Xuan & Brooks, Robert & Treepongkaruna, Sirimon & Wu, Eliza, 2014. "How does trading volume affect financial return distributions?," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 190-206.
    17. Meihui Guo & Yi-Ting Guo & Chi-Jeng Wang & Liang-Ching Lin, 2015. "Assessing influential trade effects via high-frequency market reactions," Journal of Applied Statistics, Taylor & Francis Journals, vol. 42(7), pages 1458-1471, July.
    18. Anthony Murphy & Marwan Izzeldin, 2005. "Order Flow, Transaction Clock, and Normality of Asset Returns: A Comment on Ané and Geman (2000)," Finance 0512005, University Library of Munich, Germany.
    19. Berkman, Henk & Nguyen, Nhut H., 2010. "Domestic liquidity and cross-listing in the United States," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1139-1151, June.
    20. Chordia, Tarun & Sarkar, Asani & Subrahmanyam, Avanidhar, 2005. "The Joint Dynamics of Liquidity, Returns, and Volatility Across Small and Large Firms," University of California at Los Angeles, Anderson Graduate School of Management qt6z81z2wc, Anderson Graduate School of Management, UCLA.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:intfin:v:19:y:2009:i:3:p:550-564. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/intfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.