A Tale of Two Time Zones: The Impact of Substitutes on Cross-Listed Stock Liquidity
Moulton, Pamela; Wei, Li
This article examines how the market quality of European cross-listed stocks is affected by the partial-day availability of close substitutes, i.e., shares of the same companies that are traded in their home markets but are not fully fungible with the cross-listed shares. Our findings suggest that narrower spreads and more competitive liquidity provision during overlapping trading hours reflect a significant impact from the availability of more substitutes in addition to the enhanced information environment and liquidity externalities when home markets are open. Our results also provide a richer picture of specialists’ intraday activities and offer new evidence of market integration.
substitutes; cross-listing; specialist; liquidity externalities
Required Publisher Statement: © Elsevier. Final version published as: Moulton, P. C., & Wei, L. (2009). A tale of two time zones: The impact of substitutes on cross-listed stock liquidity. Journal of Financial Markets, 12(4), 570-591. Reprinted with permission. All rights reserved.