Working Paper: NBER ID: w4743
Authors: K.C. Chan; Waiming Fong; Ren M. Stulz
Abstract: This paper compares the intra-day patterns on the NYSE and AMEX of volatility, trading volume and bid-ask spreads for European dually- listed stocks, Japanese dually-listed stocks also listed in London, and Japanese dually-listed stocks not listed in London with American stocks of comparable average trading volume and volatility. It is shown that the intra-day patterns for these stocks are remarkably similar even though the public information flows differ markedly across these stocks during the trading day. In the morning, Japanese stocks have the greatest volatility and volume, followed by European stocks and American stocks. These rankings are reversed in the afternoon. We argue that these patterns are consistent with markets reacting to the overnight accumulation of public information which is greatest for Japanese stock and smallest for American stocks and inconsistent with the view that early morning volatility can be attributed to monopolistic specialist behavior.
Keywords: information trading; stock returns; dually listed securities
JEL Codes: G12; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| public information arrival (D83) | stock return volatility (G17) |
| accumulation of overnight public information (G14) | trading volume (G15) |
| accumulation of overnight public information (G14) | stock return volatility (G17) |
| American investors reacting to public information (G14) | high volatility in early morning trading for foreign stocks (G15) |
| American news is informative about foreign stocks (G15) | differences in volatility and trading patterns between foreign and domestic stocks will be less pronounced (G15) |