Overnight information and intraday trading behavior : evidence from NYSE cross-listed stocks and their local market information
Document Type
Journal article
Source Publication
Journal of Multinational Financial Management
Publication Date
12-1-2000
Volume
10
Issue
3-4
First Page
495
Last Page
509
Keywords
Intraday volatility, Market microstructure, Multiple-market trading
Abstract
In this paper we study how overnight price movements in local markets affect the trading activity of foreign stocks on the NYSE. We find that local price movements affect not only the opening returns of foreign stocks, but also their returns in the first 30-min interval. The magnitude of local price movements is positively related to price volatility of foreign stocks, and this relation is stronger at the NYSE open and weaker afterward. This result helps explain why intraday price volatility is high at the open and lower at midday. However, local price movements cannot account for intraday variations in trading volume. We also find that trading volume for foreign stocks is strongly correlated with NYSE opening price volatility and weakly correlated with local market overnight price volatility. We interpret the result as evidence that the trading activity of foreign stocks on the NYSE is related more to liquidity trading of US investors and less to local market information.
DOI
10.1016/S1042-444X(00)00030-X
Print ISSN
1042444X
Publisher Statement
Copyright © 2000 Elsevier Science B.V. All rights reserved. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English