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Intraday Market Price Integration for Shares Cross-Listed Internationally

Published online by Cambridge University Press:  06 April 2009

Lawrence Kryzanowski  and
Hao Zhang
Lawrence Kryzanowski
Affiliation:
lkryzan@vax2.concordia.ca, Department of Finance, John Molson School of Business, Concordia University, Montreal, P.Q., H3G 1M8, Canada
Hao Zhang
Affiliation:
hzhang@uvic.ca, Faculty of Business, University of Victoria, Victoria, B.C., V8W 2Y2, Canada.
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Abstract

This study investigates market price integration by testing per-share trade execution price or cost (TEP/C) differentials for matched intraday trades for a sample of Canadian shares cross-listed in the U.S. The TSE trade price advantage over the entire time period changed significantly after both the TSE's own minimum quotation increment reduction and that of its U.S. competitors. We show that the differential TEP/C is equivalent to the international effective spread differential and that market quality comparisons, which benchmark using the National instead of the International BBO, need to compare both national effective half-spread and midspread differences. Our cross-sectional regression results support our predictions that TEP/C differentials can be explained by differences in national midspreads and by ex ante proxies of national effective half-spreads. The TEP/C differentials vary inversely with increasing levels of our measure of signed market nonfragmentation.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 37 , Issue 2 , June 2002 , pp. 243 - 269
Copyright
Copyright © School of Business Administration, University of Washington 2002

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