Price Discovery and the International Flow of Information
We document that the opening volatility of American depositary receipts (ADRs) is lower when the trading of the underlying asset overlaps trading of the ADR on the New York Stock Exchange (NYSE). This lower volatility is consistent with the notion that price discovery on the NYSE is enhanced by concurrent trading in the underlying market. We also find that ADR volatility does not change when the underlying market closes, indicating that there is no significant change in the flow of public and private information at that time. This finding suggests that the NYSE becomes the dominant market during periods when both ADRs and their underlying assets are traded.
Finance and General Business
price discovery, information flow, american depositary receipts
Howe, John S., and Kent P. Ragan. "Price discovery and the international flow of information." Journal of International Financial Markets, Institutions and Money 12, no. 3 (2002): 201-215.
Journal of International Financial Markets