Title

Price Discovery and the International Flow of Information

Abstract

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.

Department(s)

Finance and General Business

Document Type

Article

DOI

https://doi.org/10.1016/S1042-4431(02)00003-3

Keywords

price discovery, information flow, american depositary receipts

Publication Date

6-24-1905

Journal Title

Journal of International Financial Markets

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